It says something that we are now celebrating an annual inflation figure of “only” 8.5%. The latest rise in the official consumer-price index, off the charts compared to what was normal just a few years ago, is nonetheless well below Wall Street forecasts. Stocks and bonds have both jumped as a result.
But what does this mean for senior citizens living on Social Security?
The annual cost of living adjustments, or COLA, made to Social Security benefits are based on a particular version of the Consumer Price Index, known as CPI-W, designed around the supposed living expenses of “urban wage earners and clerical workers.”
The CPI-W jumped 9.1% in July from a year earlier, faster than the estimate for the broader headline figure.
Based on the latest numbers, analysts at the Senior Citizens’ League calculate that the next COLA for Social Security is likely to come in at 9.6%, equal to an extra $159 a month for a beneficiary on an average benefit of $1,656 per month.
We won’t know for certain until the Social Security Administration announces the official COLA in October. It will take effect from next January.
The adjustments will be based on the average change in prices between this year’s third quarter and last year’s third quarter: In other words, the average prices for July, August and September of 2022 compared to the average prices for those 3 months in 2021.
SCL says that based on current trends, next January’s COLA is likely to be between 9.3%, if inflation runs “colder” than expected, and as much as 10.1%, if it runs hotter.
The adjustments will be more than welcome for seniors, who have been hit badly by the recent surge in inflation.
So long as inflation is rising, Social Security beneficiaries are behind the eight ball because their annual COLAs come a year in arrears. So in January of this year they began receiving a 5.9% benefit increase, to reflect the rise of prices between 2020 and 2021. But that was already too little. The Senior Citizens League estimates that this year’s inflation has left the average beneficiary $58 worse off per month in real terms—a shortfall of $374 so far this year.
The National Council on Aging estimates that more than 15 million senior citizens in America, or about one in three, are economically insecure.
And calculations by the University of Massachusetts-Boston argue that the number of elders living in poverty, or struggling to pay for basic necessities, may be much higher than previously thought, including 45% of single men and 54% of single women.