A minor slowdown in the United States inflation rate in April prompted one senior citizen’s advocacy group to lower its cost-of-living adjustment projection for Social Security recipients for 2023, though it’s still expected to be the highest in more than 40 years next year.
The nonpartisan Senior Citizens League revised its COLA forecast for 2023 to 8.6 percent on Wednesday, down from 8.9 percent last month. The announcement came following the latest consumer price index report from the United States Bureau of Labor Statistics.
Inflation grew at a monthly rate of 0.3 percent in April, down from 1.2 percent in March and the first time inflation has dropped since last summer, according to the report. In April, yearly inflation increased to 8.3 percent, up from 8.5 percent in March.
According to Mary Johnson, the Senior Citizens League’s Social Security and Medicare policy analyst, the Social Security COLA is determined using the average rate of inflation in the third quarter of the year.
When those results are released, the average will be calculated by adding the data from July, August, and September and dividing it by three. The percentage change for 2023 will be calculated by comparing the 2022 number to the 2021 third-quarter average.
By the third quarter, there is still time for the US inflation rate to change. However, it is increasingly unlikely that it will reach the rate that the Federal Reserve aims to attain through its series of interest rate hikes. Hopes for a significant decline in inflation in the next months have all but vanished.
“In truth, no one knows with certainty, or even high confidence,” Scott Knapp, chief market strategist at CUNA Mutual Group, “The likelihood of higher inflation and tighter financial conditions, in the long run, is stronger than previously.”
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This will almost certainly result in the largest Social Security COLA in decades in 2023. According to reports, some analysts anticipate the COLA for 2023 will be around 9%, which would be the largest rise since 1981 when the COLA was 11.2 percent.
However, there’s no guarantee that the COLA will keep pace with inflation. The COLA for this year is only 5.9%, which is significantly below the current rate of inflation. It is based on inflation data from 2021. This isn’t good news for Social Security recipients.
“Most retirees in the United States are having a difficult time dealing with price hikes and inflation of this scale,” Johnson wrote in an email, noting that food insecurity, a lack of affordable housing, and high home heating bills are particularly difficult for seniors.
“We all need to keep an eye on our families and neighbors to make sure we all make it out alive.”