If you’re retired or just about to retire, next year’s Social Security checks are likely to see one of the biggest bumps on record as a result of surging consumer prices.
The average beneficiary may be in line to get as much as $180 more a month starting next January, based on recent inflation. And they are almost certainly can expect at least an extra $120.The consumer-price index rose by 8.6% in the year through May, way ahead of the 5.9% annual inflation adjustment handed out to Social Security beneficiaries in January. It will not be until October that the Social Security Administration will officially announce the annual cost-of-living adjustments for 2023.
CRFB points out that based on how COLAs are calculated, we are already on track for a cost-of-living adjustment for 2023 of at least 7.9%. That’s pretty much a guaranteed minimum. The reason? May’s CPI figure is already 7.9% above the averages for last summer. So even if there are no further price rises in the economy at all for the rest of the summer and the rest of the year, we’re looking at this level of increase.
For an average Social Security benefit of $1,657 a month, that increase would work out at $121 extra dollars a month.
But absolutely nobody thinks consumer prices stopped rising on May 31 and will stay flat for the rest of the year. The CRFB estimates that if inflation instead carries on rising at its recent rate, the next COLA is likely to be a stunning 10.8%. For someone currently receiving an average monthly check that would be worth another $178 a month.
It’s good news for retirees but only up to a point. The extra money don’t represent a real windfall, but just tries to make up for the rising cost of household expenses.
Inflation actually hurts Social Security beneficiaries. These cost-of-living adjustments only come in arrears, based on the previous year’s inflation, so you are always slightly losing ground.
As soon as we know the final Social Security COLA for 2023, we’ll update our financial modeling for you with this new information.
During our spring review meetings, we’ll provide clients with updated “retirement paycheck” projections.