Retirees and disabled people could see a record jump in the Social Security 2023 COLA increase (cost of living adjustment). That’s great news, right? However, benefits aren’t keeping up with rampant inflation and that, my friend, is a big problem.
It’s like I’ll give you a $20 bill from here in my left hand and then, I’ll take it back from you with my right. Oh, and then by the way, I’ll also take another one from your wallet, your bank account, and perhaps even charge you for that privilege too while I do it!
They say records are made to be broken and in this case, “broken” is the key word. Inflation is “breaking” all of us, but it’s really hurting and “breaking” those on Social Security—70 million Americans.
The Inflation Rate: Is It Going Up? Down? Or Sideways?
After rates of 8.5% increase in March and 8.3% in April, what will the rate of inflation be in May 2022?
By the time you read this, you will know the answer to that question. The experts, who by the way have been wrong about this every step of the way so far, predict that May’s inflation rate will be around 7.5%. I am guessing that it will be even higher than that number, but we will all know in a few hours as I write this post.
The same economic experts also feel confident that the inflation rate will be around 7.0% until the end of this quarter in June. I’m less sure.
However, there are some experts who do claim that this is a way too optimistic forecast, and the inflation rate cannot be under 8.0% this past month. But even they show some optimism and project that the inflation rate may be under 7.0% by the end of 2022.
If this all sounds like desperate, wishful thinking with a dash of political magic thrown in, it is. No one really knows the answers, but whatever the case is here, it will be slow and painful. Inflation always is just that.
Why and How Will the Rate of Inflation Change?
Forecasts for inflation are based on several key components. Improvement in the supply chain problems seems to be a big obvious one this time around and the question is when improvement will actually happen? The Russian war in Ukraine, a major event, has had indirect effects on inflation in many areas. The uncertainty in the war still remains one of the biggest risks to inflation rates both in Europe and the U.S. and whether that war is going to end soon.
There are many parts to the inflation question, but the one we are all staring at here at home is the cost of oil and natural gas. The price of a gallon of gasoline is now over $5.00 on average all over the U.S. That number is much higher in some parts of the country like California. That price seems like a bad dream, doesn’t it? I can actually remember when the price of gas was $0.25 a gallon when I had my first car in college back in 1967. Yeah, I’m old.
Those gas and oil prices have been affected by war, production, greed, and all kinds of things that are not expected to change soon. Futures on oil and gas prices are going up quickly and that means prices are going up too. It looks like it’s going to be a difficult winter in 2022-23.
What About Food?
Don’t expect near-term relief in food costs, largely because of Russia’s war on Ukraine which has curtailed the region’s wheat, corn, and other exports. That—plus the considerations in the food packing industry and the control that is having on production, distribution, and pricing—is creating the price mess. Economists are not counting on a quick resolution that will bring down prices soon.
The Profit Motive
I am convinced that profit and greed are also reasons why inflation is high! You can’t put it by business to wring every cent out of the American consumer and to try to make as much as they can. Companies that pay their CEOs millions of dollars and then cry foul whenever anyone questions their business practices and high profits are not playing fairly in my opinion. They have done it over and over and they continue to do it.
If you have doubt, try to explain why—with supply shortages high, labor supply low (yet there are still numerous jobs vacant), pay increasing, and cost of operations mounting—company profits are setting all-time records. Seems like they are benefiting from the current economic chaos.
How Much Might You Get in Benefits Next Year?
First of all, I have to say that getting your increased benefits after you spend a year trying to catch up to weekly inflation is a very backward program. If you work, you get pay and in fact, that pay is going up. It’s not keeping pace, but it’s something and it helps. With Social Security, you fall behind the price and inflation curve every day and wait—an entire year—before you see the “adjustment”. See my point?’ But, having said that, the numbers for the 2023 COLA increase are looking like this:
The average Social Security benefit is $1,658 per month, according to the Social Security Administration. If the prediction by the Senior Citizen League (TSCL) which advocates for older Americans, is accurate, retirees could see another $143 a month (or another $1,716 a year) in 2023, bringing the average check to approximately $1,800. It will be like getting another month’s worth of benefits next year!
That would be an 8.6% benefit increase each month, an all-time record increase in terms of dollars.
Sadly, benefit adjustments are not weighted toward changes in costs that hit seniors most, like healthcare as a huge biggie. And rampant inflation has caused Social Security benefits to lose 40% of their buying power since 2000, according to analysis.
In the past year alone, Social Security purchasing power dwindled 10 percentage points.
Just think about this for a second. If you saved $500,000 towards your retirement during your work life, in a year like this where inflation causes your buying power to decline 10%, your retirement nest egg just took a hit of $50,000!
When will you know about any Social Security benefit increases? The Social Security Administration will disclose next year’s Cost of Living Adjustment sometime in October when they announce the 2023 COLA increase.
Beneficiaries should receive letters in December 2022 detailing their new benefit rate for 2023. If you miss this letter, you can still verify your specific increase online via the MySocialSecurity website. It is something to look forward to and hopefully that help is on the way soon!