Good or Bad News? Social Security Checks Surge Due to Inflation
With the new 8.6 monthly inflation rate, the Social Security cost-of-living adjustment is expected to rise even higher in 2023.
The Bureau of Labor Statistics just released the latest consumer price index (CPI), its measure of inflation, and found that inflation rose by 8.6 percent in the month of April. According to CNBC, this not only was ahead of analysts’ estimates but brought inflation near a forty-year high.
“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in April on a seasonally adjusted basis after rising 1.2 percent in March, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.3 percent before seasonal adjustment,” the CPI announcement said.
“Increases in the indexes for shelter, food, airline fares, and new vehicles were the largest contributors to the seasonally adjusted all items increase. The food index rose 0.9 percent over the month as the food at home index rose 1.0 percent. The energy index declined in April after rising in recent months. The index for gasoline fell 6.1 percent over the month, offsetting increases in the indexes for natural gas and electricity.”
The annual cost-of-living adjustment (COLA) for Social Security is pegged to a similar but slightly different index, the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The COLA number rose by 5.9 percent in 2022, the biggest increase since the early 1980s.
With the new inflation rate, the COLA number is expected to rise even higher in 2023.
According to the Senior Citizens League, which follows the issue closely, the COLA increase next year could reach over 8 percent. Moreover, inflation has dramatically eroded the purchasing power of Social Security recipients this year.
“That’s the deepest loss in buying power since the beginning of this study by The Senior Citizens League in 2010,” Mary Johnson, Social Security policy analyst for the Senior Citizens League, said in a press release about the CPI report.
The Senior Citizens League calculated that based on current inflation rates, the COLA number will reach as high as 8.6 percent, although the actual number is about five months away from being announced. That’s actually lower than the 8.9 percent estimate the League issued last month. The number that ultimately determines the COLA figure comes from a comparison of that year’s third-quarter inflation with that of the previous year’s third quarter, with the announcement arriving at some point in October.
But even that might not be enough to keep up with inflation.
“Retirees know all too well that, Social Security benefits don’t buy as much today, as when they first retired,” Johnson said in the release. “To put it in context, for every $100 of goods or services that retirees bought in 2000, today they would only be able to buy $60 worth.”
Johnson did recently tell CNBC that she thinks the recent action taken by the Federal Reserve to raise interest rates could serve to slow inflation to some degree.
“People who have been retired the longest have really been impacted the most because they’ve had a cumulative effect where their COLA hasn’t been keeping up,” she said in an interview.
Stephen Silver, a technology writer for The National Interest, is a journalist, essayist and film critic, who is also a contributor to The Philadelphia Inquirer, Philly Voice, Philadelphia Weekly, the Jewish Telegraphic Agency, Living Life Fearless, Backstage magazine, Broad Street Review and Splice Today. The co-founder of the Philadelphia Film Critics Circle, Stephen lives in suburban Philadelphia with his wife and two sons. Follow him on Twitter at @StephenSilver.