Many Americans have felt the pain in their wallets this year as prices have increased for everything from gasoline to groceries due to rising inflation.
In recent months, multiple VERIFY readers who receive Social Security benefits have reached out to the team asking if they will see more money in their checks next year. This comes after Social Security recipients saw a 5.9% increase to their benefits, the largest since 1982 (7.4%), for 2022 due to an annual cost-of-living adjustment (COLA) based on inflation rates.
Is Social Security’s cost-of-living adjustment (COLA) for 2023 one of the highest in history?
Yes, Social Security’s cost-of-living adjustment (COLA) for 2023 is the highest since 1981.
WHAT WE FOUND
The Social Security Administration (SSA) adjusts benefit amounts every year to account for inflation through a cost-of-living adjustment (COLA).
Social Security provides people with an income when they retire or can’t work due to disability. Those who are retired can typically start receiving their Social Security benefits as early as age 62.
On Thursday, Oct. 13, SSA announced that Social Security recipients will receive an 8.7 % increase in their benefits beginning January 2023. This is the highest COLA since 1981, when it was 11.2%, data on the SSA website show.
Social Security benefits will increase by more than $140 per month on average, SSA said.
A cost-of-living adjustment of 8.7% is rare, Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, said. Apart from 1981, there were two other times when the COLA was higher than it will be in 2023: 9.9% in 1979 and 14.3% in 1980.
“This may be the first and possibly the last time that beneficiaries today receive a COLA this high,” Johnson said of the 2023 COLA.
COLAs for the SSI program, which provides monthly payments to adults and children with a disability who have limited incomes and resources, are generally the same as those for Social Security, though they usually take effect the month after Social Security benefit increases, SSA says on its website.
SSA will mail COLA notices throughout the month of December 2022 to retirement, survivors and disability beneficiaries, SSI recipients, and representative payees. Those who want to know their benefit amount sooner can find their COLA notice online using the Message Center in their personal my Social Security account.
How the annual COLA is calculated
The COLA is calculated based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), an inflation gauge calculated by the U.S. Bureau of Labor Statistics (BLS). It measures the average change over time in the prices that workers are paying for in a “basket of consumer goods and services.”
The SSA explains on its website that the COLA is equal to the percentage increase in the CPI-W from the third quarter average of the previous year to the same average from the current year. If there is an increase, it’s rounded to the nearest tenth of a percent. That same increase is applied to monthly Social Security payments.
In July 2022, the CPI-W increased 9.1% annually, data from the U.S. Bureau of Labor Statistics show. It dipped slightly to 8.7% annually in August 2022. Data for September show that the annual CPI-W rate was 8.5 %.