The announcement of the COLA increase may be good news for Social Security retirees, although sometimes this is not the case. The Social Security Administration always lags a bit behind when it comes to combating the increase in prices in the United States. This is because we must keep in mind that the COLA announcement is once a year, while inflation is constant.
In this regard, we only have to look at the increase in the current year 2022. Earlier this year an increase of 5.9% was made, as it corresponded to inflation in 2021. But Social Security does not take into account that inflation increases. For that reason, retirees have found themselves in a year with a huge increase in prices but a minimal increase in retirement checks.
Although this increase also affects other payments such as Supplemental Security Income, it still appears to be insufficient. Anyway, they will give the exact figure of the increase very soon. To be exact, you will be able to know what the COLA for 2023 will be next October 13th. That is this week. Being able to know this helps us to be able to calculate the money that retirees will have in the coming year 2023.
Social Security COLA higher than in 2022
Something that seems really obvious at this point in the year is that by 2023 we will have a higher Social Security COLA than in 2022. In order to calculate this increase, the Administration looks at the increase in the CPI-W in three specific months of the year. In this year 2022, the CPI-W has increased in those months by 8.7%. This indicates that the COLA increase will be close to that number.
The calculation is made with the increase in the CPI-W in the months of July, August and September. It is for this reason that the next year’s Social Security COLA is not known until mid-October. For many retirees, this measure is insufficient, as it does not reflect the real increase in inflation. By the time the increase takes real effect, prices will have risen even more.
In mid-2022, there was talk of an increase of close to 11%, but as of today this seems impossible. Inflation has stagnated a bit, which is good news, but it has not stopped increasing prices. On the 13th we will see if the Social Security Administration will finally announce a very high COLA increase or if it will be insufficient for most retirees.