According to an analysis by the impartial Committee for a Responsible Federal Budget (CRFB), the Social Security Administration’s (COLA) projected cost of living adjustment in 2023 is expected to reach 11.4% next year if inflation continues at its current pace. persists.
“HOLY COLY – if there is no inflation for the next three months, the Social Security COLA would be 9% next year. At our current rate, that will be 11.4 percent,” said Marc Goldwein, the commission’s senior policy director , in a tweet in early August.
Under the commission’s assumption of 11.4%, average retirement benefits would rise $190 per month or $2,280 per year.
The Senior Citizens League also predicted that if inflation continues at its current rate, the adjustment for 2023 could reach 11.4%.
The benefit increase that retirees will receive is officially calculated by the Social Security Administration in October and is based on the average inflation during the third quarter as determined by the Consumer Price Index for Urban Wages and Employees (CPI-W).
The cost of living adjustment can be as high as 11.4% if the July, August and September figures are used, said Martha Shedden, president and co-founder of the National Association of Registered Social Security Analysts.
Inflation in the US rose to 9.1% in June, the highest since November 1981, and rose from 8.6% in May. It was also above market forecasts of 8.8%. The Social Security Administration’s inflation measure, which is indexed to the agency’s cost of living calculation, rose to 9.8%.
As a result, even if inflation levels off, Social Security benefits could rise to 9.8% next year, the Senior Citizens League said in an analysis.
“Right now, the latest estimate I’ve seen is just over 9%,” Shedden says. “It is a difficult situation for retirees when inflation rises as much as it is now. The COLA adjustment is calculated on a one-time basis, based on the previous year. We all thought the 5.9% increase last year was pretty high, and look what happened.” Since its inception in 2017, the National Association of Registered Social Security Analysts has trained more than 3,300 advisors and other financial professionals for Social Security Analyst certification.
Shedden believes that inflation has created more awareness about the value of Social Security as a hedge against inflation.
“This is the one annuity most people have,” she says.
Inflation awareness has also encouraged more lawmakers to introduce legislation to “fix” the shortage of Social Security funds, Shedden added.
A new bill called the Social Security Expansion Act seeks to pay retirees an additional $2,400 annually in benefits and seeks to solve the projected Social Security shortfall by requiring payroll taxes to be levied on all income above $250,000 a year, including capital gains.
The legislation was introduced in the House of Representatives in early June by Peter DeFazio, an Oregon Democrat, and in the Senate by Bernie Sanders, a Vermont independent. The bill would pay current Social Security recipients — and those turning 62 in 2023 — an additional $200 a month.
The Social Security Administration announced in July that Americans will stop receiving their full Social Security benefits in about 13 years if Congress fails to support the program.
“This legislation would ensure that the Social Security Trust Fund remains solvent for another 75 years,” DeFazio, a trained gerontologist, said in a statement.
Sanders said the legislation would ensure that “every senior in America can retire with the dignity they deserve…by requiring the richest people in America to pay the same amount of Social Security taxes as someone who earns $147,000 a year. It’s time to remove the cap, expand benefits and fully fund Social Security.”