Happy New Year: Find Out When Your Social Security Cost of Living Hike Kicks In
Does your New Year’s resolution involve a new hobby, fun vacation destination or pricey new gym membership? Then you may want to know when you’ll be receiving your Social Security cost of living adjustment (COLA), which can help you bankroll all your plans for the new year.
The federal government promised that the COLA would be coming in 2023. The great news is, most people can expect to see the increase in their Social Security checks in their first check of the new year. The Social Security Administration (SSA) plans to apply the 8.7% cost of living boost in January for most recipients.
Why Such a Big COLA in 2023?
The rise represents the largest bump in COLA since 1981 — which, not coincidentally, is also the last time the nation saw inflation this high. The SSA changes payments based on the rate of inflation because retirees use their benefits checks as income to pay for the types of things that see prices rise, such as gas, groceries and utilities.
The SSA wants to maximize seniors’ purchasing power, and the 5.9% COLA in 2021 simply didn’t keep pace with inflation. In fact, the Senior Citizens League (SCL) found that Social Security beneficiaries faced a deficit of $500 in 2022 because of the lagging gains.
“Across the board, retired and disabled Social Security recipients spend a bigger portion of their incomes on health care costs, housing and food and less on gasoline. Over the past 12 months, they rank food costs as their fastest-growing expenditure, housing and transportation, in that order,” said Mary Johnson, an SCL Social Security and Medicare policy analyst, in a press brief.
Because of the deficit they faced between inflation and their Social Security checks, four out of 10 seniors spent all their emergency savings to make ends meet in 2022, according to the SCL.
How Much Will Your Check Rise?
The impact of the bigger COLA will depend on how much you bring in from Social Security. But the SSA will increase the average check by $140 per month, going from $1,681 to $1,827. That will total $1,680 throughout the year.
Inflation Does Appear to Be Slowing
The good news is that the significant increase in COLA should serve seniors well throughout 2022 as the rate of inflation readjusts. In January, the inflation rate hit a 40-year high. But in November, the consumer price index had begun to stabilize, with the core CPI rising 0.2% when you remove energy and food, the two most volatile sectors. That marked the smallest rise in more than a year, coming on the heels of a 0.3% hiccup in October.
Making smart investments to complement your Social Security benefits can help you navigate the tricky waters ahead. Staying informed about market developments and knowing what’s coming down the line also help. If you want assistance with any of this, reach out to Jay and let him know your concerns. He can aid you through this challenging period.