It looks like there’ll be at least one silver lining to skyrocketing inflation.
Seniors will be getting a nice raise next year.
The roughly 70 million people – retirees, disabled people and others – who rely on Social Security could receive an 8.6% cost-of-living adjustment, or COLA, next year, according to an estimate from Mary Johnson, a policy analyst for the Senior Citizen League, an advocacy group.
For the average retiree who got a monthly check of $ 1,657 this year, the bump would mean an additional $ 142.50 a month in 2023, boosting the typical payment to $ 1,800.
“It will be a lifesaver,” Johnson says. “It means they can buy an extra week of groceries. They’ll be able to afford to heat their home for the next month. People will be able to pay their electric bill. ”
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Of course, a healthy COLA increase would simply help retirees keep pace with soaring inflation. The consumer price index leaped 8.3% in April, easing slightly off 40-year highs for the first time in months but staying elevated. That means this year’s 5.9% increase in Social Security payments has fallen well short of the rise in costs faced by seniors, disabled people and other beneficiaries.
“It still wasn’t enough,” Johnson says.
The Social Security Administration set the 2022 COLA last October after consumer prices had started rising sharply but before the historic run-up of recent months that was intensified by Russia’s war in Ukraine.
Forty-four percent of seniors surveyed by her group are relying on food stamps, food pantries and other social service assistance, a share that has doubled since October, Johnson says.
“Some of them are in dire straits,” she says.
Retirees already were struggling to keep up with climbing expenses. As of March 2021, Social Security recipients had lost 30% of their buying power since 2000 as COLAs grew by about half as much as the cost of goods and services typically purchased by retirees, according to the league.
By March 2022, that gap in purchasing power had widened to 40%, the largest such annual decline Johnson has recorded.
SSA bases its cost-of-living adjustment on average annual increases in the consumer price index for urban wage earners and clerical workers, or CPI-W, from July through September. The CPI-W largely reflects the broad CPI that the Labor Department releases each month but differs slightly. Last month, while the CPI rose 8.3%, the CPI-W increased 8.9%.
Inflation is expected to gradually ease this year as supply chain bottlenecks improve and so the actual COLA, which will be set in October, could be somewhat less than Johnson’s projections. Barclays estimates annual inflation will be running at about 7.7% by summer.
Johnson has complained that the basket of goods that determines the CPI-W index does not reflect the spending patterns of seniors who buy less gasoline, electronics and other products that make up a large portion of younger workers’ spending. Seniors instead spend more on food, health care costs and other items that have seen sharp price increases during the pandemic.
Johnson has called for the SSA to base its COLA on a proposed index for the elderly called CPI-E that would put more weight on health, food and other expenditures.