Social Security recipients struggling with higher inflation are likely to get a major boost in their monthly benefits starting next year.
Thanks to the high inflation reading for July, beneficiaries could receive as much as $159 extra per month in 2023, according to a new estimate from the Senior Citizens League, a nonprofit advocacy group.
The Social Security Administration’s annual cost of living adjustment (COLA) formula is based on inflation readings for July, August, and September. Even if inflation peaked in July, the readings for the next two months are still likely to be significantly higher than in years past, given that consumer prices have remained at 40-year highs for most of 2022.
Mary Johnson, policy analyst and editor at the Senior Citizens League, said she is currently projecting an annual adjustment of 9.6%, which would be the biggest boost to Social Security benefits since 1981.
“That’s really phenomenal,” she said. “Effectively, no one receiving Social Security at the moment will have received a COLA this high.”
A 9.6% adjustment would compare with an increase of 5.9% last year, which equated to a monthly average earnings bump of $92.30.
Johnson said people on fixed incomes have been among those most impacted by the 40-year-high inflation rates, which means benefit payments have not kept pace with rising prices this year. As an example, the Senior Citizens League estimates that, based on the inflation rate through July, a $1,656 monthly Social Security benefit is about $58 less than it should be per month, on average.
And for most beneficiaries, the coming increase will still fall short of what recipients need to catch up with price increases on food and other consumer goods, Johnson said. Already, 37% of participants surveyed by the Senior Citizens League said they received low-income assistance in 2021. That is more than double the 16% who were receiving needs-based assistance before the pandemic.
“Social Security was never designed to be a sole source of income for people,” Johnson said.
The Social Security Administration is expected to announce the 2023 cost of living adjustment in October after the consumer price index data for September is released.