The consumer price index (CPI) rose by 8.5 percent year-over-year in March 2022, the most since 1981. With inflation running at a multidecade high, consumers are facing elevated prices for everything, from groceries and furniture to gasoline.
And if their income stays the same, they have less purchasing power. This is especially true for senior citizens, who are living on fixed income. To cope with inflation, social security benefits may be adjusted. Will social security get a raise in 2023?
Policymakers review social security benefits annually
Policymakers review social security benefits annually to preserve consumers' purchasing power. Social security benefits got a COLA (cost-of-living adjustment) of +5.9 percent in 2022, the highest in about 40 years. This was based on 2021 inflation data, and in 2022, inflation has been running even higher.
Another measure the Social Security Administration (SSA) uses to calculate COLA is the consumer price index for urban wage earners and clerical workers (CPI-W). This measure has grown even more than the CPI in the last 12 months, by 9.4 percent.
Social security's COLA could be even bigger in 2023
Experts believe that inflation may have peaked in March 2022 but don't expect it to cool down significantly, given the ongoing Russia-Ukraine war and supply-chain issues. Therefore, the COLA may be higher in 2023.
According to Mary Johnson of the Senior Citizens League, the average social security recipient has lost $162.60 in purchasing power. Also, the Senior Citizens League estimates that the social security COLA for 2023 should be an increase of 8.9 percent.
How will retirees be affected by the COLA?
Around 68 million people, including retirees and disabled people, receive social security benefits. About half of seniors are living in households where social security benefits account for at least 50 percent of income.
Although social security benefits are higher, many doubt this increase will boost beneficiaries’ purchasing power amid the inflation. Food, electricity, housing, and medication are more expensive, as are Medicare Part B premiums. (In 2022, standard Medicare Part B premiums increased by 14.5 percent, to $170.10 per month.)
To cope with the higher costs, the Senior Citizens League's Mary Johnson suggests seniors try to reduce some expenses. Using pharmacy coupons from GoodRX and asking doctors for less expensive alternatives can help seniors save money.