If you are a Social Security recipient and are wondering about what the Social Security COLA for 2023 will be and when it will be announced, we can help. Due to rising inflation, experts are projecting a big increase in COLA for next year. In this post, we will provide details on how COLA is calculated, what COLA rate you can expect from rising inflation, and when 2023 Social Security increases will be mailed to beneficiaries.
Table of Contents:
- What is Social Security COLA?
- How is Social Security COLA Calculated?
- Social Security COLA for 2023
- When will the COLA for 2023 Be Announced?
- How Inflation Affects COLA
What is Social Security COLA?
The Social Security Administration (SSA) is required by law to prevent inflation from eating into the buying power of the nearly 69 million Americans who receive benefits.
To do this, the SSA uses a Social Security COLA formula based on the consumer price index to adjust payouts every January.
Since prices typically rise, payouts typically rise also. If prices ever fell, payouts would stay unchanged until prices catch back up again.
The COLA is calculated from the third quarter (July through September) Department of Labor’s Consumer Price Index (CPI-W).CPI-W.
How is Social Security COLA Calculated?
The Social Security Act specifies a formula for determining each COLA.
According to the formula, COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics.
The Social Security Administration uses average inflation in the third quarter, based on the CPI-W, to calculate the benefit adjustment for the following year.
The first COLA was announced in June 1975.
Since then, the Social Security Administration has been announcing annual adjustments to Social Security benefits based on increases in the cost of living, as measured by the Consumer Price Index.
Here are the COLA rates for the last 20 years:
As you can see, the COLA announced for 2021 was 5.9% and that went into effect in January 2022.
Social Security COLA for 2023
The June 2022 Consumer Price Index (otherwise known as the inflation rate) rose 9.1% over the past 12 months.
That is the biggest increase since November 1981.
Should this trend in inflation continue through September, experts are predicting a big increase in the Social Security COLA for 2023.
The Senior Citizens League estimates the Social Security cost-of-living adjustment, or COLA, for 2023 could be 10.5%.
This is higher than the 8.6% it predicted in May 2022.
If the COLA increase for 2023 is indeed 10.5%, it would be the biggest increase since 1981.
Also, that will increase the average retiree benefit of $1,668 by $175.10.
When will the COLA for 2023 Be Announced?
The Social Security COLA for 2023 will not be released until October 2022.
Social Security beneficiaries should receive letters in December 2023 detailing their specific benefit rate for 2023.
The COLA goes into effect with December benefits, which appear in Social Security checks received in January 2023.
How Inflation Affects COLA
Inflation continues to rise over the last year, hitting a record in June 2022 of 9.1%.
Here’s how a few things that cost a lot more in June 2022 than they did in June 2021:
Gasoline – up 59.9%
Electricity – up 13.7%
Natural Gas – up 38.4%
Eggs – up 33.1%
Butter – up 21.3%
Milk – up 16.4%
Chicken – up 18.6%
Coffee – up 15.8%.
Shelter costs – up 5.6%.
Health Insurance – up 17.3%
See the average Social Security Check by age.
Social Security Increase for 2023 Summary
Here’s the bottom line:
As Inflation hits a record in June 2022, it is projected that the Social Security COLA for 2023 will hit double digits (including Spousal benefits and disability).
According to The Senior Citizens League, the COLA for next year could reach 10.5% or more.
A 10.5% COLA would amount to a $175.10 increase to the average monthly retirement benefit of $1,668.
If you still have questions, you should leave a comment below.
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It’s a very active group with some really smart people who love to answer any questions you may have about Social Security Benefits.
Also, from time to time, our team of editors drop in to contribute and answer questions.
Finally, be sure to check out our other articles about Social Security and Disability Benefits, including: