To make ends meet, millions of Americans rely on Social Security benefits.
The majority of beneficiaries are retired workers, although the government may also pay out payments to disabled people, children, and spouses.
Even though Social Security benefits are initially computed using a worker’s wage history, if monthly payments remained the same, they would quickly lose their purchasing power.
Upcoming Social Security COLA Raise in 2023
A law passed in 1973 established annual cost-of-living adjustments, which went into effect in 1975, to stop that from happening.
These changes, also referred to as COLAs, might differ greatly from year to year. Some claim they don’t sufficiently account for rising elderly expenses.
However, the 2023 Social Security COLA was the highest in many years, which was unquestionably good news for senior citizens.
The Social Security COLA often results in an increase in the monthly benefit amount for beneficiaries.
Social Security recipients often see a rise in benefits each January, much like employees may see annual cost-of-living raises in their pay or salaries.
Although some may view it that way, it’s not really a bonus, asserts Judi Leahy, a senior wealth advisor with Citi Personal Wealth Management in Rye, New York.
The COLA’s goal is to assist benefits stay up with inflation instead.
When there isn’t any inflation, which is extremely rare, Social Security payments will stay the same the following year.
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Determining Additional Benefits for Next Year
The Social Security Act mandates that COLAs be calculated using the consumer price index, or CPI. However, there are a number of CPI variations accessible.
The CPI-W, which is the consumer price index for urban wage earners and office workers, is linked to the Social Security COLA.
The federal Bureau of Labor Statistics calculates this index once per month.
The CPI-W rate for the third quarter of the year, which ends on September 30, is used by the Social Security COLA to calculate the COLA for the following year.
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