Competing With Inflation: Social Security Cost of Living Adjustment Rises to 8.7% for 2023
Each fall, 70 million benefits recipients hold their breath, waiting for the U.S. Social Security Administration to announce next year’s cost-of-living adjustment (COLA). These adjustments are designed to offset the impact of inflation on recipients of social security benefits, who often struggle with costs of fuel, housing, and food. High medical bills and rising drug prices can severely limit recipients’ purchasing power of elderly beneficiaries in particular. This year, the COLA rose to 8.7% for the coming year, the largest boost in benefits since 1981.
1975 marked the first COLA increase for Social Security recipients. This amount was based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the second quarter of 1974 to the first quarter of 1975. The boost in payments was thought necessary to keep up the pace of inflation. Today, the COLA is decided annually based on the announced inflation rate during the third quarter of each year, from July to September.
Those qualified for monthly Social Security payments should see the same 8.7% increase in their checks - this change increases the average monthly benefit ($1,656) by $144.10. To check how this adjustment will affect your payments, multiply your current payment by 1.087. This will be the amount you see each month in 2023.
Some recipients, however, are concerned that this COLA is not enough to counteract the rise in consumer prices. Inflation, which reached a high of 9.1 in June, has continued to grow, surpassing 2022’s COLA of 5.9%. In the same vein, some argue that the CPI-W does not put as much weight on medical costs as it does fuel. The former expenses tend to be higher for older Americans. Thankfully, the $35 monthly cap on insulin prices and the 3% drop in Medicare premiums announced for 2023 should somewhat relieve these pressures.
The acting commissioner of the Social Security Administration said of these changes: “ This year’s substantial Social Security cost-of-living adjustment is the first time in over a decade that Medicare premiums are not rising and shows that we can provide more support to older Americans who count on the benefits they have earned.”
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