Revised Social Security benefits forecast for 2023 as inflation declines
The record increase in Social Security benefits in 2023 could be lower than expected as inflation declines, according to a new forecast from the Senior League.
The consumer price index (CPI), a measure of inflation, increased by 8.3% per year in August, a slight improvement from 8.5% in July, the Bureau of Labor Statistics (BLS) said. This is the second consecutive month of decline in the annual inflation rate.
The latest CPI data showed the Social Security Cost of Living Adjustment (COLA) could be 8.7% for 2023, according to the Senior League. That’s down from the group’s forecast last month, when it said benefits could rise up to 9.6% Next year. But while the increase is lower than previous forecasts, it will still be the largest increase ever received by most Social Security recipients alive today, the group said.
Last year, social security benefits increased by 5.9%. If benefits increase by 8.7% in 2023, it will be the biggest increase since 1981, when high inflation pushed the COLA to 11.2%, according to the Social Security Administration (SSA).
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Average increase in social security for seniors
An 8.7% increase in COLA next year means the average Social Security recipient would receive $1,656 in monthly benefits and 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 the amount of their current checks by 0.087.
The SSA will likely announce the Social Security increase for 2023 in mid-October, following the release of September inflation data. The new benefit amount will come into effect in January 2023.
“COLAs are intended to help maintain the purchasing power of Social Security benefits when prices rise,” the Senior Citizens League said in its forecast. “This is a permanent increase that will gradually increase the total Social Security income that individuals will receive during retirement. Without a COLA that adequately keeps pace with inflation, Social Security benefits less and less over time, which can create challenges, especially as older Americans live longer in retirement.”
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More Americans are changing their spending habits as inflation rises
As inflation remains near a 40-year high, many Americans have started coping by changing their spending habits, according to a recent Morning Consult survey. Many consumers have also reported noticing the product size of their purchases shrinking, in a phenomenon known as “shrinkflation.”
The survey says 54% of Americans have seen, read or heard about shrinkage, and 64% are worried about it. About 48% of Americans said they purchased a different brand when faced with shrinkage, and 49% said they chose a generic product instead, according to Morning Consult.
Although inflation has 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 about how these actions could potentially impact the US economy.
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