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Social Security recipients in 2022 began adjusting the cost of living by 5.9% for their monthly paychecks, the highest increase in nearly 40 years.
But with inflation rising with each month, the purchasing power of that increase has diminished.
The Consumer Price Index for all urban consumers, or CPI-U, is up 8.5% from a year ago, according to March data released by the US Bureau of Labor Statistics on Tuesday.
Meanwhile, another metric the Social Security Administration uses to calculate the annual cost-of-living adjustment, or COLA — the consumer price index for urban wage earners and clerical workers, or CPI-W — has jumped 9.4% over the past 12 months.
The average retirement benefit in 2022 increased to $1,656.30 from $1,564, an increase of $92.30 per month, according to the Senior Citizens League, a large nonpartisan group.
If those benefits continue to keep pace with inflation, the average retiree benefit will instead have to be $1,711 based on March data, an increase of $147 over the average retiree benefit for 2021, according to the Senior Citizens Association.
So far this year, retirement benefits average a shortfall of $162.60, according to the group’s calculations.
Retirees are feeling the pinch as prices rise in key categories, including food, housing costs, home heating and medicine. The standard Medicare Part B premium cost increased 14.5% for 2022 to $170.10 per month.
A higher inflation rate may indicate greater inflation in 2023.
Based on March data released Tuesday, the Senior Citizens Association estimates COLA will be 8.9% for 2023. That’s higher than the group’s estimate last month of 7.6% COLA for next year.
The coming months for CPI-W data will surely go into the official COLA account for next year. The Social Security Administration usually takes the average CPI-W for the third quarter of the current year and compares it to the average of the third quarter of the previous year in order to determine if there was an increase in COLA.
Some experts believe that peak inflation may subside before then.
Economist Jason Furman, Harvard University professor and former chief economic advisor to President Barack Obama, Tweet on Tuesday He sees “a glimmer of hope” due to the fact that core CPI has fallen and basic services have only risen slightly.
“Perhaps the worst is now behind us,” Foreman said.
Inflation began to take off in March 2021, noted Mary Johnson, Senior Citizens League Social Security and Medicare policy analyst, and it could also be a turning point this year, with a potential moderation in the coming months.
If that happens, the 2023 estimate for Social Security COLA will be reduced.