Commentary Aug 10, 2022 at 07:44 AM Share & Print
The consumer price index data for July, released Wednesday, shows 8.5% inflation over the past 12 months before a seasonal adjustment and was unchanged from June to July on a seasonally adjusted basis. In June, prices rose by 9.1% over 12 months and 1.3% from May.
Based on this data, the Senior Citizens League estimates the Social Security cost-of-living adjustment, or COLA, for 2023 could be 9.6%, lower than the 10.5% it predicted last month. A 9.6% COLA would be the biggest increase since 1981. The adjustment would increase the average retiree benefit of $1,656 by $159, according to the league.
If inflation runs “hot” or higher than the recent average, the COLA could be 10.1%; if inflation runs “cold” or lower than the recent average, the COLA could be 9.3%, according to the advocacy group.
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.
“A high COLA will be eagerly anticipated to address an ongoing shortfall in benefits that Social Security beneficiaries are experiencing in 2022 as inflation runs higher than their 5.9% COLA,” Johnson said in a statement. “A $1,656 benefit is short about $58 a month and by a total of $373.80 year to date.”
The annual COLA underscores the financial pressures that many Social Security recipients face.
Thirty-seven percent of participants in the Senior Citizens League’s new Seniors Priority Survey reported they received low-income assistance in 2021. This appears to be more than double the 16% receiving needs-based assistance before the pandemic, as reported by the U.S. Census Bureau, according to Johnson.
“This suggests that the pandemic and inflation have caused significantly higher numbers of adults living on fixed incomes to turn to these programs to supplement their Social Security and Medicare benefits as prices have continued to climb,” she said.
“This group of older and disabled Social Security recipients are at risk of experiencing low-income assistance benefit trims when the COLA boosts their Social Security income … in 2023. In 2022, when the COLA is 5.9%, some 14% of survey participants said their low-income assistance was reduced due to their COLA, and another 6% reported losing access to one or more programs altogether when the COLA boosted their income over the limit,” Johnson explained.
The league surveyed more than 2,557 participants from May through July 2022.
When Will the 2023 Social Security COLA Be Announced?
There are only two months of consumer price data left before the Social Security Administration announces the COLA for 2023. The Senior Citizens League expects the SSA to announce it on Oct, 13, after the release of the September consumer price index data.
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.
Medicare Part B premiums may not grow very much next year, according to Johnson, who doesn’t expect an announcement until mid-November.
July Inflation Numbers
The gasoline index fell 7.7% in July after an 11.2% increase in June, offsetting increases in the food and shelter indexes, which resulted in the all-prices index being unchanged for the month, the Bureau of Labor Statistics reported. After rising 7.5% in June, the energy index fell 4.6% in July; the gasoline and natural gas indexes declined while the electricity index rose.
The food index increased 1.1% in July after a 1% gain the previous month, the seventh straight monthly rise of 0.9% or more. The food at home index rose 1.3% in July, with all major grocery food group indexes climbing, led by nonalcoholic beverages, the bureau reported.
The index for all items excluding food and energy rose 0.3% in July, a smaller increase than seen in April, May and June, the BLS reported. Indexes for shelter, medical care, motor vehicle insurance, new cars, recreation, and household furnishings and operations increased over the month, while the airfare, used vehicle, communication and apparel indexes were among those registering declines.
For the 12 months ended in July, inflation on items excluding food and energy increased 5.9%, the same increase logged for the year ending in June.
The BLS stated that over the past 12 months the energy index rose 32.9%, a smaller increase than the 41.6% rise for the year ended in June. The food index gained 10.9% over the same period, the largest increase since the period ending May 1979.
The shelter index rose 0.5% in July, slightly less than the 0.6% in June. For the last 12 months, the shelter index increased 5.7%, contributing about 40% to the overall increase in all items excluding food and energy.