Social Security Announced an 8.7% Cost of Living Adjustment (COLA)–Here’s What That Means for You
Since 1975, the Social Security Administration has reviewed the cost of living to influence benefit increases, which they refer to as Cost-of-Living Adjustments (COLA). On October 13 of this year, they announced an 8.7-percent COLA. As a result, Social Security (SS) recipients can expect slightly bigger checks starting in January 2023.
FAQ about the 8.7% COLA for Social Security
Is 8.7% a significant amount?
Yes! 8.7% is the biggest percentage jump since 1981.
What’s the increase based on?
The SSA uses the Consumer Price Index (CPI) to gauge whether a COLA is warranted (don’t worry, this is the last acronym you’ll need to remember—the alphabet soup ends here!). The CPI uses the buying habits of residents in urban or metropolitan areas as well as urban wage earners to identify price-change experiences for goods and services. These can fall into buckets like food, housing, and more.
Inflation has remained high, causing the cost of some goods and services to rise with it. Since August, the price index doubled the amount economists expected it to.1 Monthly changes in September include a 1.6% increase in the price of fruits and vegetables and an .8% increase in rent for a primary residence.1
How does this impact current SS recipients?
Seniors currently on SS stand to gain buying power if the rate of inflation slows in 2023. If it does not, that 8.7% COLA may not feel like as much of a raise. There’s no guarantee, which is why many wealth management professionals suggest having a diversified retirement income portfolio.
How does this impact future SS recipients?
Prior to the COLA, the Trustees of the Social Security Trust Funds estimated that SS would be able to pay out full retirement and survivor benefits until 2034. Now, experts worry that the larger benefits because of the COLA will cause these reserves to run out faster.
Is the COLA automatically applied to benefits?
Yes! Anyone eligible for SS benefits will see the difference reflected in the benefit amounts they receive starting January 2023.
The Social Security Administration will mail out COLA notices throughout December, but you can also view yours with a my Social Security account starting early December. To learn more about the recent COLA, visit the official Social Security website. With half of Americans 65 years or older depending on SS benefits for half of their income, it’s important to stay up to date on these adjustments.3General Electric Credit Union (GECU) members can easily accomplish this with Investment Services, available through CUSO Financial Services, L.P. (CFS).4 During your no-cost consultation, you can talk over your retirement goals as well as the retirement income options available to you–including Social Security, annuities, and more! Visit us online to learn more about our dedicated financial advisors and subscribe to our Youtube channel for on-demand webinars on retirement topics.