Last week’s U.S. inflation report dimmed hopes that consumer prices will ease anytime soon, which likely means that in 2023, Social Security recipients will get their highest cost-of-living adjustment in more than four decades.
Inflation for May rose 8.6% from the previous year, according to the Bureau of Labor Statistics’ latest Consumer Price Index, released on June 10. That was the largest annual increase since 1981.
Following the report, The Senior Citizens League — a nonpartisan seniors advocacy group — issued a statement that it expects the Social Security COLA for 2023 to be 8.6%, based on May CPI data. That represents no change in its forecast from last month.
As previously reported by GOBankingRates, the Social Security COLA is calculated by using the average rate of inflation in the third quarter of the year. When those figures come out, the data for July, August and September will be added together and divided by three to get the average. The 2022 number will then be compared with the third quarter average of 2021 to determine the percentage of change for 2023.
Based on May’s CPI numbers, it’s becoming increasingly doubtful that the inflation rate will go down significantly in coming months despite efforts by the Federal Reserve to tame it through interest rate hikes. If the 2023 Social Security COLA does get set in the neighborhood of 8.6%, it will represent the highest yearly COLA since 1981, when the COLA was 11.2%.
An official with the Social Security Administration told CBS News that recipients are likely to receive a COLA “closer to 8%” at the end of 2022.
Although this year’s COLA of 5.9% is the highest since 1982, it doesn’t come close to matching the current inflation rate — which means Social Security recipients are fighting a losing battle against high prices. Since the beginning of 2022, the average monthly retiree benefit has fallen short of inflation by about $263, according to Mary Johnson, the Senior Citizen League’s Social Security and Medicare policy analyst
The problem is especially grim in terms of essential food items that budget-strapped seniors need to survive.
Since May 2021, the food-at-home index for meats, poultry, fish and eggs has climbed 14.2%, with beef and veal up 10.2%, pork up 13.3%, chicken up 17.4% and the eggs index up a whopping 32%. Prices for popular everyday items surged as well. For example, the unadjusted May index for bacon, breakfast sausage and related products rose 15.6% year over year. The index for bread rose 8.7%, while the index for milk climbed 15.9%.
“Prices are still climbing towards historic heights,” Johnson told GOBankingRates in an email. “Inflation is nearly 10% higher than it was this time a year ago, and both the Congressional Budget Office and Social Security Administration have forecast that inflation will stick around.”
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