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Retirement Planning > Social Security > Claiming Strategies

2023 Social Security COLA Estimated at 7.6% as CPI Keeps Rising

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What You Need to Know

  • The CPI increase of 7.9% in February doesn't include commodity price jumps due to Russia's invasion of Ukraine.
  • Higher food prices have been a key reason seniors are struggling, The Senior Citizens League says.
  • Indications are prices will continue to rise, despite what the Federal Reserve does.

Thursday’s consumer price index release showing that prices over the past year through February have risen by 7.9% — the largest increase since since January 1982, and 0.8% from January to February, are just the beginning, as that number doesn’t include commodity price jumps due to Russia’s invasion of Ukraine and the extraordinary jump in energy prices.

Further, the cost-of-living adjustment, or COLA, as estimated by The Senior Citizens League, would be 7.6% — the highest since 1981 — based on the CPI-W data released by the Bureau of Labor Statistics, Mary Johnson, Social Security and Medicare policy analyst, told ThinkAdvisor. Granted, it’s early days in projecting the 2023 COLA, but this shows the impact on Social Security benefits.

Gasoline, shelter and food were the largest contributors to the rise in inflation. Gasoline prices have risen 38% over the past 12 months, and that doesn’t include recent jumps in prices due to the Ukraine invasion.

Changes in food prices rose 7.9% over the past 12 months, the biggest increase since July 1981.

The bad news, Johnson says, is that older adults are already hurting financially, and it doesn’t seem it will get better in the near future. In a survey the SCL took of more than 2,000 seniors, 47% said they have applied for SNAP (Supplemental Nutrition Assistance Program) or visited a food pantry in the past 12 months. That is up from 23% in an October 2021 survey.

“You hear stories that food pantries have seen record numbers, and what we’re seeing [now] is older people living on fixed incomes are replacing those younger workers who [now] are going back to work. That’s very alarming,” Johnson told ThinkAdvisor.

She also points out that due to the Ukraine conflict, oil, wheat and corn prices will continue to be affected.

The SCL survey also found in a new question that 43% of older adults who responded are carrying credit card debt. Further, 24% say they have applied for heating/cooling assistance, which is up from 11% in October 2021. And 20% said they had depleted their retirement account, she said.

Overall, prices probably will continue to go up, despite Fed actions. She notes in a comparison (see table) that the 5.9% COLA for 2022 seems paltry right now when looking at price increases. For example, the changes in month-over-month inflation, measured using the CPI-W, shows shortfalls from the COLA increase. From December to February, the total shortfall is $107.90  for the average retiree.

And looking at the trend, “it implies it will be higher,” Johnson said.