How much will Social Security increase shortly? The cost-of-living adjustment (COLA), which attracted the most attention, was predicted to be close to 11%. Since 1981, there has never been this large COLA.
The high-minded forecasts, however, failed to account for recent statistics that the US government revealed. You may say goodbye to 11% of your Social Security raise since the stats don’t lie.
Kiss Your 11% Social Security Increase Goodbye https://t.co/ZImpjmJev0
— Newsonline (@Newsonl45817660) September 17, 2022
A Slowdown in Inflation
Social Security COLAs are to shield retiree income from being reduced by inflation. The annual growth has generally been moderate during the previous 40 years since inflation rates have been low. There hasn’t been any rise for Social Security recipients in three years.
This year’s astronomically high inflation rates have served as the foundation for all predictions of a significant Social Security rise for 2023. It seems logical that your COLA would indeed be exceptionally high due to rising costs.
There are a few crucial facts about the Social Security Administration’s (SSA) method for calculating COLAs.
First, the agency simply compares the average inflation rate between the 3rd quarter of this year and the corresponding quarter of last year.
Second, rather than using the Consumer Price Index for All Urban Consumers (CPI-U), typically referenced in inflation reports, the SSA employs the Consumer Price Index for Urban Wage Earners & Clerical Workers (CPI-W).
The Probability of Inflation
For the past two months, the CPI-W index that the SSA uses to determine COLAs has decreased, albeit very marginally. The CPI-W dropped by 0.2% in August, from 292.219 to 291.629, from July’s reading of 292.219.
To truly understand how much the Social Security rise will be, we must wait until the September inflation statistics are released.
The release of such figures is delayed until mid-October. But it’s already quite apparent that about 11% COLA is unlikely.
The most significant monthly CPI-W increase since yearly Social Security COLAs went into effect in 1975 was 1.5%. It took place in May 2022.
Looking around, we can see that the costs of homes and gasoline, two of the main factors contributing to inflation, have decreased from earlier in the year. The probability of inflation continuing to fall is substantially higher than the probability of a significant increase.
Kiss a Large COLA Hello
The subsequent Social Security rise would be roughly 8.9% relying on the Third quarter average up to this point. The increase would be the biggest for Social Security beneficiaries in years.
Only three years since 1975 have had larger COLAs. You should probably say goodbye to your 11% Social Security raise. However, you’ll undoubtedly be able to say hello to a historically significant COLA soon, reports Fool.
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