Social Security recipients could see a significant increase in benefits next year due to skyrocketing inflation.
The Senior Citizens League (SCL) reported that Social Security payments could see a cost of living adjustment (COLA) increase of 10.5% next year. That means about $175 would be added to the current average monthly retiree benefit of $1,668.
The Labor Department announced on Wednesday that the consumer price index increased 1.3% last month after advancing 1.0% in May — the largest annual increase in inflation in 40 1/2 years.
"If inflation runs 'hot' or higher than the recent average, the COLA could be 11.4%," Mary Johnson, SCL Social Security and Medicare policy analyst, told 401k Specialist.
"If inflation runs 'cold' or lower than the recent average, the COLA could be 9.8%."
This year's 5.9% COLA increase was the biggest since 1982.
"Inflation has been so high and so much higher than the 5.9% COLA that people got, they have experienced a shortfall in their benefits," Johnson said. "If people do not have adequate retirement savings or cash savings that they can easily get to, people are putting more on consumer credit cards."
The SCL said the COLA rose by 9.8% over the past 12 months, compared with the 9.1% annual jump for the consumer price index (CPI).
In June, Johnson estimated a COLA increase of 8.6%, which had held steady the past two months based on CPI data from April and May.
Another recent 2023 COLA estimate, from the Committee for a Responsible Federal Budget, predicted a 10.8% increase. That was released before the Labor Department's announcement on Wednesday.
The Social Security Administration will not determine the actual 2023 COLA until October, after inflation rates are tracked in July, August, and September.
However, if an 11.4% COLA increase becomes reality, it would top 1981's 11.2% COLA increase and trail only 1980's record 14.3% increase.
A large adjustment, though, could hurt low-income seniors who would be pushed above the income limits to qualify for government aid, such as food stamps, or require them to start paying taxes on the benefits.
A new SCL survey found that 71% of seniors say providing a COLA adjustment that provides sufficient Social Security benefits to combat was a top priority for Congress.
Half of seniors said they had to spend emergency savings over the past year, according to an SCL survey conducted between January and March. That compares with 36% in a survey done last year.
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