Could 2023 Social Security COLA hit 9%?
Estimates from The Senior Citizens League are getting close to that.
The transition for boomers into retirement status has not been a smooth one — especially when it comes to their wealth and buying power. The buying power of Social Security benefits of those who retired before the year 2000 has eroded by 40%, according to Social Security policy analyst Mary Johnson, with the Senior Citizens League. The organization’s recent 2022 Social Security Loss of Buying Power Study report says that’s the largest drop in buying power since the study began in 2010.
High inflation this year alone led to an erosion of 10 percentage points, the report says. Among the10 typical expenditures for seniors that Johnson tracks, prices for home heating oil and gasoline have risen the most since March 2021 — 79% and 51% respectively. But costs for food and for Medicare Part B premiums have also jumped. Johnson’s most recent Social Security cost-of-living adjustment estimate, which is based on consumer price data, pegs the 2023 COLA in the neighborhood of 8.6 percent.
The report goes on to say that between January of 2000 and March 2022, Social Security COLAs increased benefits by 64%, but the costs of goods and services purchased by typical retirees rose by more than twice that rate — 130%. For every $100 a retired household spent on groceries in 2000, that household can only buy about $60 worth today.
The average Social Security benefit in 2000 was $816 per month. That benefit grew to $1,336.90 by 2022 due to COLA increases. However, because retiree costs are rising at a far more rapid pace than the COLA, this study found that a Social Security benefit of $1,876.70 per month in 2020 would have been required ($539.80 more) just to maintain the same level of buying power as in 2000.
Related: 3 Social Security changes coming in 2021
Interestingly, The Senior Citizen League conducted a separate survey and found that less than one-quarter of survey participants, (24%), said they would definitely owe taxes on their benefits, versus the 47% who reported paying taxes on Social Security benefits in a survey conducted after tax season, last fall.
There’s also considerable uncertainty about the potential amount of tax on Social Security benefits. “Making matters worse, the survey indicates that retired and disabled taxpayers are more uncertain than ever about their tax liability this year,” says Ms. Johnson.
To help protect the buying power of benefits, The Senior Citizens League supports legislation that would strengthen the COLA in three ways:
- Calculate COLAs based on a consumer price index that better reflects the spending patterns of retirees.
- Provide a modest boost in monthly benefits to retirees to make up for years when no COLA or only a negligible COLA was paid.
- Guarantee a minimum COLA of no less than 3 percent for future adjustments.
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