As inflation quickly erodes the purchasing power of elderly Americans, Social Security recipients are set to receive the largest cost-of-living increase in almost four decades.
Based on April inflation data, which showed that consumer prices rose 8.3 percent from the previous year, close to a 40-year high, the Senior Citizens League, a nonpartisan group that focuses on issues affecting older Americans, estimated on Wednesday that the adjustment could be as high as 8.6 percent in 2023.
The annual rise in Social Security is computed using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which increased by 9.4% in the previous year.
If Social Security recipients enjoy an 8.6% increase in their monthly checks next year, it will be the largest yearly increase since 1981, when they saw an 11.2 percent increase.
The Senior Citizens League earlier expected that the COLA for 2023 would be 8.9%, but headline inflation has since moderated significantly.
In October, the Social Security Administration will announce the final adjustment percentage.
The projection is still susceptible to change, and it all depends on whether inflation has reached its peak or will continue to grow. While economists cited Wednesday’s number as proof that inflation is slowing,
they also pointed out that prices grew faster than predicted and are still near a record high, implying that any decrease will be gradual.
Excluding volatile items like petrol and food, core inflation increased in April, scaring some analysts.
“This does not appear to bring any respite to households experiencing a loss of purchasing power or to policymakers attempting to restore price stability without precipitating a recession,” said RSM chief economist Joe Brusuelas.
The average Social Security payment increased by 5.9% in 2022, a monthly gain of $92 for the average retired American, bringing the total amount to $1,657, according to the Social Security Administration.
According to calculations by the Senior Citizens League, however, rising inflation has already destroyed the full gain.
According to a recent analysis from the Senior Citizens League, Social Security recipients have lost 40% of their purchasing power since 2000.
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“That’s the biggest drop in purchasing power since we started this study in 2010,” said Mary Johnson, a policy analyst at the Senior Citizens League, who led the study.
Despite the fact that Social Security payouts have increased by 64% since 2000 due to cost-of-living adjustments, median senior expenses have increased by 130 percent through March 2022.
Social Security would have to increase by $539.80 per month to maintain the same purchasing power as it did 22 years ago.
The Senior Citizens League has lobbied Congress to pass legislation that would index the Consumer Price Index for the Elderly, or CPI-E, to inflation exclusively for seniors.
The spending of households with adults aged 62 and up is tracked by this index.