Predicting a massive increase in Social Security in 2023? Here’s why this really isn’t a good thing | personal financing
Will seniors be in line for the largest increase in Social Security over the next year’s decades? This seems likely.
In June, the Consumer Price Index (CPI) rose 9.1% year-on-year, marking the index’s largest increase in nearly 40 years. Now, Social Security cost-of-living adjustments, or COLAs, are actually based on third-quarter inflation data from CPI-W, the consumer price index for urban wage earners and clerical workers. And this is not data we haven’t seen yet (what happened in July and all).
But still, it’s fair to assume that Social Security benefits will increase significantly in 2023. Some estimates call for a 10.5% increase, which would far exceed the 5.9% for COLA seniors they received in early 2022.
People also read…
But while some Social Security recipients may be eagerly anticipating a big COLA next year, the truth is that a giant raise isn’t really a good thing. the reason? You are not likely to actually help the elderly move forward financially.
Why a big COLA isn’t a reason to celebrate
When Social Security benefits rise too high, it is only because high levels of inflation allow it. But this means that in a best-case scenario, a large COLA would allow seniors to conserve their purchasing power in light of inflation – not get more of it.
And remember that this is the best case scenario. Earlier this year, many Social Security seniors thought they would sit back beautifully following a 5.9% increase. But as we can see, the inflation rate has remained well above 5.9% over the past number of months. This means that the elderly have already lost purchasing power this year.
But that’s not the only reason seniors can’t get too excited about COLA. The other reason is that if Medicare costs go up a lot in the next year, they’ll eat more of that COLA.
In 2022, the premium for Standard Medicare Part B was $170.10. In 2021, it was $148.50. That $21.60 monthly jump wiped out a good portion of this year’s COLA, and there’s no reason to assume the same won’t happen next year.
As such, while seniors can expect to receive generous COLAs for 2023, they should not expect their standard of living to improve as a result. Those looking for more financial breathing room will likely need to take matters into their own hands by cutting expenses or looking to work part-time.
The good news regarding the latter is that the economy of temporary jobs has expanded and increasingly flexible. Thus, working part-time may mean finding a remote job or a job with a schedule that is easy to manage.
Take the next COLA ad with some kind of truth
Social Security COLAs are usually announced during the first half of October. Until then, seniors can only guess the surge heading their way. But they also need to be realistic about what this increase might actually do for them.
It is certainly a good thing that Social Security benefits are designed to keep pace with inflation. But it is also important to realize that they often fail to do so.
The $18,984 Social Security bonus is totally overlooked by most retirees
If you’re like most Americans, you’re behind on retirement savings for a few years (or more). But a few little-known “Social Security secrets” can help ensure a higher retirement income. For example: One easy trick can pay you up to $18,984 extra…every year! Once you learn how to maximize your Social Security benefits, we believe you can retire with confidence with the peace of mind we all seek. Simply click here to discover how to learn more about these strategies.
Motley Fool has a disclosure policy.