Price inflation in the United States and the rest of the world can have a negative impact. It is true that not only retirees with a Social Security retirement benefit are affected. In addition to them, this rise in prices can affect other workers. But it is also true that workers may have a monthly salary increase. Retirees, on the other hand, do not receive a pension increase on a monthly basis, but on an annual basis.
This implies that each month’s payment is the same throughout the year, regardless of inflation. Therefore, people who only live on Social Security may not have a very easy time paying all the bills and expenses. That is why the COLA is so important. Thanks to this system, every year retirement benefits go up a little bit. And next year, if everything continues like this, the increase will be historic and could reach a 10% increase.
Why will Social Security go up so much with the COLA?
During 2022 we have seen a 5.9% increase in Social Security through the COLA. This increase has been the largest in a long time, but it has not been enough. As of today, prices have risen more than 7%, making this increase insufficient. Retirees are losing purchasing power and some are having serious problems paying their bills.
Considering that we already have such a large increase in general prices, the increase for next year should be higher. This increase is intended to bring Social Security benefits in line with inflation. It is quite possible that SSA will have trouble reaching such a high increase, but will do its best to underwrite retiree costs.
How much will the COLA increase in 2023?
The COLA increase is calculated based on the increase in prices. Inflation in July, August and September will have a direct impact on retirement benefits in 2023. Depending on general prices in these months, we will have a higher or lower increase. At the moment, prices have increased by almost 8%. We will see a historic increase if everything continues like this, but it is very possible that prices will increase even more.
If we are talking dollars directly, in 2022 the average Social Security benefit increased by $93. If the path continues this way, the increase figure for next year 2023 could be between $120 and $180 per month, according to Cnet. A historic increase that remains to be seen. We will have to wait until October to know an exact number.
