Social Security Benefits COLA 2023 Estimate – Pushes Into Double Digits
Social Security Benefits COLA 2023 Estimate – Pushes Into Double Digits – Social Security beneficiaries may be seeing their cost-of-living adjustments in 2023 reach double digits at the beginning of nearly four decades, as prices in the United States continue to spiral up and upwards, despite government efforts to contain them.
In light of Wednesday’s Consumer Price Index report from the U.S. Bureau of Labor Statistics which revealed that inflation in June was up 9.1 percent from the previous year in 2023, the average COLA is around 10.5 percent as per the Senior Citizens League, a non-partisan senior advocacy group.
If this happens it would mark the first time that COLA has surpassed double-digits since it reached 11.2 percent in 1982, as per the Social Security Administration. The current COLA of 5.9 percent is the highest since 1981. In the year before, the COLA was just 1.3 percent.
If inflation is “hot” -or even more than the current average in 2023, the COLA maybe 11.4 percent, according to Mary Johnson, the Senior Citizens League’s Social Security and Medicare policy analyst. It would be the second-highest COLA ever since SSA began to implement cost-of-living adjustments in the year 1975. The most expensive COLA ever recorded was 14.3 percent in 1981.
If inflation remains “cold,” or lower than the current average the COLA for next year could be 9.8 percent, Johnson said.
Much will depend on how the efforts of the Federal Reserve to ease inflation by increasing interest rates work out. The Fed has already increased rates three times during the year, including a rise to 75 basis points in the month of Junethe first time it has done this since 1994. There’s an expectation that the Fed might make another 75-point increase in the coming month.
The inflation rate for the current quarter will be able to speak about the amount of a boost Social Security recipients get in 2023. As previously published by GOBankingRates and GOBankingRates, the COLA is calculated by taking the average rate of inflation for the final quarter. When the figures are released and are released, the figures from July, July, and September are added up and then divided by three to create the average. The 2022 figure will be compared to the third quarter of 2021’s average in order to calculate the proportion changes for 2023.
“A higher COLA is highly anticipated to resolve a continuing deficit on benefits Social Security beneficiaries are experiencing in 2022, as inflation is greater than their 5.9 COLA of 5,” Johnson told GOBankingRates in an email.
Some people aren’t happy with how it is that the Social Security COLA is determined (partly due to the fact that it’s based upon the Consumer Price Index for Urban wage earners and Clerical Workers that doesn’t take into account increases in the Medicare Part B cost.
“In 2022 Part B increased 14.5 percent, which is one of the biggest jumps in the history of the program,” Johnson said. “The Part B tax is deducted automatically out of Social Security checks, and the beneficiaries of 2022 are contemplating this.”
A major increase in the next COLA could be tax-related negative if lawmakers modify the thresholds of income that apply to Social Security beneficiaries. A 10.5 percent COLA would boost the average retirement benefits from $1,668 to $175.10 According to an estimate by the Senior Citizens League.
Increased incomes usually result in reductions in benefits related to income for people with low incomes and higher tax rates for those who earn more than $25,000 for an individual and $32,000 for married couples Johnson stated.
“The Senior Citizens League believes that tens of thousands of retirees who did not pay taxes on their retirement benefits in the past could find they need to begin paying by 2023.” She said. “Because the thresholds for income aren’t adjusted as normal income brackets. These one-time COLA increases could result in an increase in taxes that will last for a long time for the majority of retirees.”
A higher income can also result in a reduction in income-adjusted Medicare healthcare and prescription drugs for those with low incomes.