Increase in Social Security Benefits Possible in The Following Year
When their monthly benefits increased by 5.9 percent in 2022, Social Security recipients will have received the largest cost-of-living adjustment for more than four decades!
According to early estimates, that annual adjustment could rise to as much as 8% next year. Though last week’s annual report on social security indicated an increase of 3.8 percent for 2023, this is despite this fact.
Social Security actuary Stephen Goss told a Bipartisan Policy Center
Briefing last week that a COLA closer to 8% than 3.8 % is “likely,” based on current CPI-W trends. CPI-W stands for the Consumer Price Index for Urban Wage Earners and Clerical Workers, a subset of a larger measurement of changes in prices for goods and services.
By mid-February, the trustee’s report had projected that the COLA would rise by 3.8% next year. This year’s increase is expected to be even higher because of high inflation, which has continued since then.
“That is actually good news for the beneficiaries who are currently eligible for benefits this year,” Goss said. A “substantial” increase in their financial well-being is expected. Certainly, the COLA for 2023 could change before it is officially announced later this year. Keeping an eye on inflation is a must.
The annual COLA for Social Security is calculated by comparing the CPI-W data from the third quarter of the current year to the third quarter of the previous year, as described above. As a result, the COLA for 2023 will be influenced by how inflation performs in July, August, and September.
According to the Social Security Administration, an 8 percent COLA would represent the largest increase in many years. More than a decade ago, in 1981, the federal agency announced an 11.2 percent annual bump.
According to Goss, a record-high COLA could be offset by rising average wages
A 5.6% rise in wages was anticipated by the trustees, but the data from W-2s so far indicates that it is more likely to be around 8%, he added. This means that COLA and average wages are both higher than expected.
There should be no significant impact on the program’s solvency because of the way those factors tend to balance one another, according to Goss. The problem is that some experts fear that a record-high COLA for next year could hurt the program’s finances.
Trustees have just released their annual report, which found that the trust funds the program relies on to pay benefits have improved. There is now a one-year delay in the projected depletion date for the combined asset reserves of both funds. As of that point, 80% of the benefits will be paid out.
According to Maya MacGuineas
President of the nonpartisan, nonprofit Committee for a Responsible Federal Budget, a much higher COLA would bankrupt the program by the tens of billions of dollars it already owes.
According to MacGuineas, this could push the program’s insolvency date up a year. Congressional inaction would be an abdication of responsibility, she said. “Not one member of Congress should read this report and think, ‘Oh, I know the best course of action is to do nothing,'” MacGuineas said.
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