It’s not official yet, but if current inflationary trends continue for the next three months, next year’s Social Security cost-of-living adjustment could boost benefits by 10% or more — the largest annual increase in 41 years.
U.S. inflation as measured by the consumer price index rose 0.7% in June compared to the previous month and jumped 9.1% over a year ago, the Labor Department reported Wednesday.
Based on the June CPI data, Mary Johnson, Social Security analyst for the Senior Citizens League, projects Social Security benefits could increase by 10.5% next year. That would be the largest annual increase since 1981, when benefits rose 11.2%.
The official Social Security COLA for 2023 will be announced in October. It's based on the increase in the average CPI for the third quarter — July, August and September — over the previous year’s third quarter.
This year, Social Security benefits increased by 5.9% for more than 65 million recipients. But much of this year’s increase was offset by the historic 14.5% jump in Medicare Part B premiums, which are deducted directly from monthly Social Security benefits.
If Social Security benefits increased by 10.5% next year, the average retiree would receive an additional $175 a month, based on this year’s average benefit of $1,668 per month, Johnson said.
While Social Security benefits could increase by double digits next year, Medicare premiums may stay level or even decline, leading to a larger net Social Security benefit for most retirees.
The Department of Health and Human Services announced earlier this year that it would hold the line on Medicare Part B premiums in 2023 to offset the large premium hike in 2022 that was triggered by the cost of a new drug to treat Alzheimer’s disease. The drug manufacturer later halved the price of the drug, but not in time for HHS to adjust the Medicare premium for this year.
[Questions about Social Security rules? Find the answers in Mary Beth Franklin’s ebook at Maximizing Social Security Retirement Benefits]
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