The record 2023 Social Security benefits increase could be lower than previously expected as inflation eases, according to a new forecast from The Senior Citizens League.
The Consumer Price Index (CPI), a measure of inflation, rose 8.3% annually in August, a slight improvement from 8.5% in July, the Bureau of Labor Statistics (BLS) said. This marked the second consecutive month of decreases to the annual inflation rate.
The latest CPI data showed that the Social Security cost-of-living adjustment (COLA) could be 8.7% for 2023, according to The Senior Citizens League. This is down from the group's forecast last month when it said benefits could increase by as much as 9.6% next year. But while this increase is lower than previously forecasted, it will still be the highest increase ever received by most Social Security beneficiaries alive today, the group said.
Last year, Social Security benefits rose by 5.9%. If benefits increase by 8.7% in 2023, it will be the highest increase since 1981, when high inflation pushed COLA to 11.2%, according to the Social Security Administration (SSA).
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Average Social Security increase for seniors
A COLA increase of 8.7% next year means the average Social Security recipient would receive $1,656 in monthly benefits and would see an increase of $144.10 per month, according to The Senior Citizens League. In order to see what your exact increase would be, retirees can multiply their current check amounts by .087.
The SSA will likely announce 2023’s Social Security increase in mid-October, after the release of September’s inflation data. The new benefit amount will take effect in January 2023.
"COLAs are intended to help maintain the buying power of Social Security benefits when prices rise," The Senior Citizens League said in its forecast. "They are a permanent increase that will gradually boost the total Social Security income that individuals will receive over the course of their retirement. Without a COLA that adequately keeps pace with inflation, Social Security benefits purchase less and less over time, and that can create hardships especially as older Americans live longer lives in retirement."
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More Americans changing their spending habits as inflation surges
As inflation remains near its 40-year high, many Americans have begun to cope by changing their spending habits, according to a recent survey from Morning Consult. Many consumers also said that they have noticed the product size of their purchases is shrinking, in a phenomenon dubbed "shrinkflation."
The survey said 54% of Americans have seen, read or heard something about shrinkflation, and 64% are worried about it. About 48% of Americans said they bought a different brand when confronted with shrinkflation, and 49% said they chose a generic product instead, according to Morning Consult.
Although inflation improved over the past two months, it remains at levels not seen since the 1980s. The Federal Reserve has continued to raise interest rates in order to combat rising inflation, but there are discussions on how these actions could potentially impact the U.S. economy.
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