The government adjusts Social Security benefit payments each year to account for inflation. With inflation running red hot in 2022, TSCL predicts that we could see the largest cost of living adjustment (COLA) since 1981 next year.
The COLA is based on inflation readings by the Labor Department in July, August, and September. Even though some economists believe inflation peaked last month, when the Consumer Price Index (CPI) dipped to 8.5%, inflation is not expected to drop that much during this month and September.
The Social Security Administration will announce the increase in October, with the first payment reflecting the increase showing up in January 2023. Mary Johnson, policy analyst and editor of The Social Security and Medicare Advisor newsletter, estimates that payments could increase by as much as $159 a month.
"That’s really phenomenal," Johnson told NBC News. "Effectively, no one receiving Social Security at the moment will have received a COLA this high."
A 9.6% increase would follow last year’s 5.9% adjustment, which was the highest in decades. Because of low inflation, some years leading up to 2022’s adjustment saw no increase at all.
Medicare premiums are also likely to rise
Social Security recipients who are also on Medicare would likely not see the full amount of any benefit increase. The cost of Medicare premiums is deducted from Social Security payments and, because of inflation, those premiums are probably going to be more expensive in 2023.
Johnson believes even a 9.6% increase in benefits would probably not be enough for many seniors to keep up with the cost of living in a high inflationary environment. She cites a TSCL survey that found 37% of participants received low-income assistance last year.
A 2017 study by researchers at the Social Security Administration found that nearly 20% of Americans aged 65 and over received at least 90% of their total incomes from Social Security.