The Social Security Administration’s projected 2023 cost-of-living adjustment (COLA) is projected to hit 11.4% next year if inflation continues at its current pace, according to new analysis from the nonpartisan Committee for a Responsible Federal Budget (CRFB).
“HOLY COLY—with no more inflation for the next three months, the Social Security COLA would be 9% next year. On our current course it will be 11.4 percent,” said Marc Goldwein, the committee’s senior policy director, in a tweet on Monday.
Under the committee’s 11.4% assumption, average retiree benefits would increase $190 a month or $2,280 a year.
The Senior Citizens League also projected that if inflation continues on its current course, the 2023 adjustment could be 11.4%.
The benefit increase retirees will get is officially calculated by the Social Security Administration in October and is based on average inflation during the third quarter as determined by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The cost-of-living adjustment could be as much as 11.4% if it uses July, August and September numbers, said Martha Shedden, president and co-founder of the National Association of Registered Social Security Analysts, in an interview with Financial Advisor.
The U.S. inflation rate rose to 9.1% in June, the highest since November of 1981, and up from 8.6% in May. It was also above the market forecasts of 8.8%. The Social Security Administration’s inflation measure, which is indexed to the agency’s cost-of-living calculation, rose to 9.8%.
As a result, even if inflation flattens, the Social Security benefit could bump up next year to hit 9.8%, said the Senior Citizens League in an analysis.
“Right now, the latest estimate I’ve seen is a little over 9%,” Shedden said. “It’s a difficult situation for retirees when inflation is increasing as much as it is today. The COLA adjustment is calculated on one moment in time, based on the year before. We all thought the 5.9% increase was pretty high last year, and look what’s happened.” The National Association of Registered Social Security Analysts has trained more than 3,300 advisors and other financial professionals for the Social Security Analyst certification since it was founded in 2017.
Shedden believes inflation has created more awareness of the value of Social Security as a hedge against inflation.
“This is the only annuity most people have,” she said.
Inflation awareness has also encouraged more lawmakers to introduce legislation to “fix” the Social Security fund shortfall, Shedden added.