The Social Security Cost of Living Adjustment (COLA) for the coming year is expected to be the biggest rise in four decades amid skyrocketing inflation and unprecedented interest rate increases.
Prior to Thursday’s release of the Consumer Price Index report, the Senior Citizens League (SCL) has estimated the rate at 8.7%. This accounts for the little slowdown in inflation and represents a reduction from the previous estimate of 9.6 percent.
Prices have increased 8.3 percent over the past 12 months, slightly less than July’s 8.5 percent increase, according to the CPI report for August.
This could be the first and/or final time recipients receive a COLA this high, according to SCL. An increase in the COLA this high would be the biggest since 1981, when it was 11.2 percent, even after taking into consideration the league’s lower estimate.
Thursday’s release of the CPI report for September is anticipated to be followed by the announcement of the COLA for the following year.
Social Security benefits eventually buy less over time if there isn’t a COLA adequate enough to keep up with inflation. The 5.9 percent COLA for this year has been significantly exceeded by inflation during the previous 12 months.
It’s possible that low-income aid users won’t get as much.
However, according to Mary Johnson, the Senior Citizens League’s social security and Medicare policy expert, a larger benefit check could have an impact on how much low-income assistance beneficiaries receive.
According to Johnsons, any increase in a Medicare beneficiary’s income, whether it comes through COLAs, a job, a pension, or retirement savings, could cause them to exceed the income cutoff for assistance.
“Those who get low-income support for healthcare costs may see their assistance through Medicare Savings programs, Medicare Extra Help, or Medicaid reduced,” the author warns. Beneficiaries of these life-sustaining benefits who have greater incomes as a consequence of COLA may lose their eligibility if their incomes surpass the cap.
Some beneficiaries of low-income assistance have already seen the impact of the COLA from the previous year. According to a recent SCL study, 39% of people who received low-income assistance in 2021 reported that their payments were decreased in 2022. 15% of people claimed to have completely lost access to one or more low-income programs.
Even more beneficiaries of low-income assistance could be impacted if the 2023 COLA rises higher than 5.9 percent, as all recent accounts show it would.
Future recipient benefits could be threatened by a larger COLA now.
In recent years, concerns about Social Security’s long-term viability have persisted, and a historically large payout increase could exacerbate those worries. According to Johnson, a rise in predicted lifetime Social Security benefits as a result of a higher 2023 COLA would be permanent.
This growth benefits recipients in the near term, but over time, it dramatically raises the costs that Social Security will have to shoulder. This may cause Social Security’s insolvency to occur sooner than initially predicted.
The risk of insolvency could also increase in the event of a possible recession and a decrease in the payroll taxes paying Social Security.
The Social Security system would be under two strains at once: a greater benefit amount and the expectation of its continuation; and a diminished ability to pay for it.
