Social Security COLA Estimate Set at 10.5% for 2023 as Inflation Accelerates in June
What You Need to Know
The Consumer Price Index rose 9.1% in June over the past 12 months, the biggest increase since November 1981.
Mary Johnson of The Senior Citizens League warns that rising Social Security benefits can carry hidden costs.
The June data could force the Fed to act more aggressively and increase the risk of recession, a CIO says.
The consumer price index data for June, released Wednesday, shows that prices have risen by 9.1% over the past 12 months before a seasonal adjustment — the largest year-over-year increase since the period ending November 1981 — and 1.3% from May to June on a seasonally adjusted basis. May statistics showed prices rose by 8.6% over 12 months and 1% from April.
Based on this data, the Senior Citizens League estimates the Social Security cost-of-living adjustment, or COLA, for 2023 could be 10.5%, higher than the 8.6% it predicted last month. A 10.5% COLA would increase the average retiree benefit of $1,668 by $175.10, rounded, the advocacy group said this morning. It would be the biggest increase since 1981.
If inflation runs “hot” or higher than the recent average, the COLA could be 11.4%, according to the SCL, which added a forecasting range to its usual estimate. If inflation runs “cold” or lower than the recent average, the COLA could be 9.8%, according to the league.
Mary Johnson, the league’s Social Security and Medicare policy analyst, bases monthly COLA estimates on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the CPI-W. In June, the league pegged the 2023 COLA at 8.6%.
The Social Security Administration uses average inflation in the third quarter, based on the CPI-W, to calculate the benefit adjustment for the following year. The COLA was 5.9% in 2022, the highest in nearly four decades.
Inflation in June was broad-based, with the biggest price increases in gasoline, shelter and food, according to the Bureau of Labor Statistics. After rising 3.9% in May, the energy index climbed 7.5% in June and contributed nearly half of the overall increase, with the gasoline index rising 11.2%.
The food index increased 1% June after a 1.2% gain the previous month. The food at home index also rose 1% in June, marking the sixth straight month with at least a 1% increase in that measure, according to the BLS.
The index for all items excluding food and energy rose 0.7% in June after increasing 0.6% in the preceding two months, the BLS reported. For the 12 months ended in June, inflation on items excluding food and energy increased 5.9%, slowing slightly from the 6.0% for the year ending in May.
The BLS stated that over the past 12 months the energy index rose 41.6%, the largest increase since the period ending in April 1980. Gasoline rose 59.9% over that period, the largest year-over-year increase since March 1980. The electricity and natural gas indexes also saw the biggest 12-month price increases since the mid-2000s.
The food index gained 10.4% over the same period, the largest 12-month increase since the period ending in February 1981, the BLS said.
Inflation and Retirees
A new Senior Citizens League survey found that 71% of seniors ranked a cost-of-living adjustment that better protects Social Security benefits from inflation a top priority for Congress. The group collected 2,309 survey responses in May and June.
