The largest cost-of-living adjustment in a generation could hit Social Security checks in 2023 as inflation continues.
The exact adjustment will not be known until next month, but current estimates are generally 8-10%. Even on the low end, that would make for the highest cost of living adjustment since 1981.
The cost of living adjustment for 2022 was 5.9%, which was the highest increase since the early 1980s—the period the Federal Reserve refers to as “The Great Inflation.” The adjustments apply to both Social Security and any Supplemental Security Income benefits.
The average Social Security check in 2022 is $1,656, according to USA Today, so a high adjustment could increase that average to about $1,800 next year. Adjustments are based on the change in the Consumer Price Index for Urban Wage Earners and Clerical Workers, also known as the CIP-W, from the third quarter of the previous year to the third quarter of the current year. The CIP-W is determined by the Bureau of Labor Statistics.
Since the third quarter includes September, the earliest the number will be known for certain is October. The Social Security Administration notifies recipients of the cost of living adjustment in December.
Automatic adjustments based on the CPI-W began in 1975, and since then, there has been a cost of living adjustment almost every year with the exception of 2009, 2010 and 2015. The highest adjustment was 14.3% in 1980, at the height of The Great Inflation.
If inflation is the same in August and September as it was in July, the adjustment would be 9.1%, according to AARP. David Certner, the organization’s director of legislative policy for government affairs, said that number could change slightly, depending on how the rest of the quarter looks.
“It’s not possible to be precise until we see the data for the next two months, but it’s probably safe to say at this point we can expect a COLA in the 8 to 10 percent range,” Certner said in an August statement.
The Senior Citizens League, a nonpartisan advocacy group for older adults, estimates an adjustment of 9.6%, but writes the rate could top 10% if inflation “runs hot” for the rest of the quarter. Mary Johnson, a Social Security and Medicare policy analyst for the organization, said a high adjustment would be welcome to seniors, especially because the last adjustment was not enough to deal with this year’s inflation.
“A high COLA will be eagerly anticipated to address an ongoing shortfall in benefits that Social Security beneficiaries are experiencing in 2022 as inflation runs higher than their 5.9% COLA,” Johnson said in a statement. “Based on inflation through July, we calculate that a $1,656 benefit is short about $58 per month on average and by a total of $373.80 year-to-date.”
According to the SSA, more than 69 million Americans receive Social Security benefits, and a 2020 analysis found that about 40% of senior citizens rely on Social Security as their only source of income.