Social Security recipients could receive a big bump in their benefits next year, but it may not be enough to counter the impact of inflation.
Inflation continues to climb, pushing consumer prices higher than forecast in April. The consumer price index, which measure of prices for goods and services rose 0.3% from the prior month and 8.3% on an annual basis, which is among the highest in decades, according to the Bureau of Labor Statistics report on Wednesday.
Based on this latest data, the annual cost of living adjustment (COLA) for 2023 could be "around 8.6%,” according to estimates from Mary Johnson, a Social Security policy analyst for The Senior Citizens League (TSCL). Johnson bases her estimate on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) through April.
And while that would be the biggest COLA jump since 1981, Johnson is more concerned about the immediate impact of inflation on seniors today. High inflation, she said, has caused Social Security benefits to lose 40% of their buying power since 2000, the deepest loss in buying power since the beginning of a study she has conducted for TSCL in 2010.
The 2022 COLA was 5.9% and was the highest inflation adjustment in 40 years for the millions of Americans collecting Social Security and Supplemental Security Income (SSI). But Johnson had said while the increase was welcomed, Social Security recipients were still feeling the effects from rampant inflation because COLAs have not kept pace with some of the fastest growing costs of older households
In her tracking of Social Security purchasing power since 2010, Johnson said it plummeted by 10 full percentage points, from a 30% loss of buying power in March of 2021 to 40% in March. That has been the largest drop in purchasing power since the study, which compares the growth in the Social Security COLA adjustments with increases in the price of 37 goods and services typically used by retirees, began. “While prices rose in almost every spending category, benefits were most impacted by sharp increases in energy costs for home heating, gasoline, and higher food prices, and a steep 14.5% increase in Medicare Part B premiums in January of this year,” Johnson wrote.
“Retirees know all too well that Social Security benefits don’t buy as much today, as when they first retired,” Johnson said. "To put it in context, for every $100 of goods or services that retirees bought in 2000, today they would only be able to buy $60 worth.”
Johnson’s said her research found that since 2000, COLAs have increased Social Security benefits by a total of 64%, but seniors continue to struggle.
Typical senior expenses through March grew by more than double that rate at 130%, she said, noting that the average Social Security benefit in 2000 was $816 per month. That benefit grew to $1,336.90 by 2022 due to COLA increases. She said because retiree costs are rising so much faster than the COLA, the study found that a Social Security benefit of $1,876.70 per month in 2020 would have been required ($539.80 more) just to maintain the same level of buying power as in 2000.