As a result of rising inflation, the cost-of-living adjustment (COLA) for billions of Social Security pensioners might be the largest in four decades. The same increase in 2023 benefits for Social Security beneficiaries, disabled veterans, and federal retirees will be published in the fall.
However, the Senior Citizens League, a nonpartisan advocacy organization, recently calculated that the 2023 COLA might be 10.5%. If this turns out to be the case, it would be the largest rise in Social Security payouts since 1981 and far more than the 5.9% COLA for 2022. CNN was informed by the Senior Citizens League that a 10.5% COLA for 2023 would increase the average monthly pension payment of $1,688 by around $175.
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The advocacy group’s estimate is based on the June reading of the Consumer Price Index for Urban Wage Earners and Clerical Workers, which showed prices rising by 9.8 percent over the past twelve months. The Social Security Administration uses the average inflation in a year’s third quarter based on the index to calculate how much to increase Social Security payments for the following year.
By 2023, an 11.4 percent COLA increase is possible if present inflation trends persist, according to the Committee for a Responsible Federal Budget (CRFB). A 9% COLA will be in place if the inflation rate rises. For people on a fixed income, the goal of the COLA is to protect their Social Security benefits from the impacts of inflation.
Although the 5.9 percent COLA adjustment for 2022 was exceeded, many retirees will face financial difficulties as prices rise further, the League’s policy analyst, Mary Johnson, told CNN. The 5.9 percent COLA that consumers received “has been so high and so much higher than the 5.9 percent inflation rate that folks have experienced a deficit in their benefits,” Johnson said. “People are putting more on their credit cards because they don’t have enough retirement savings or cash.”
Social Security income will be taxed at a higher rate in 2023 if the COLA is increased by more. When it comes to taxes, a wage base limit of $147,000 will apply in 2022. As a matter of fact, the cap, which is based on the national average pay index, is expected to grow to $155,100 in 2015. According to recent studies, more American workers are retiring or planning to retire later in life because of changes made to the Social Security program in the 1980s that are now affecting retirement-age workers.
The Senior Citizens League and the Social Security Administration have been contacted by Newsweek for additional information.