Although the 2022 bump in U.S. Social Security benefits was already seen as historic when the figures were announced late last year, the payment to beneficiaries in 2023 could be historically high once again due to the level of inflation the economy is currently experiencing.
If inflation remains at current levels, the Social Security Cost of Living Adjustment (COLA) could increase by as much as 10.8%, which would push the monthly benefit payment to its highest level since 1981 according to a prediction by the non-profit Committee for a Responsible Federal Budget (CRFB) and reported by Money.com.
“A 10.8% COLA would be the highest rate in 42 years,” the report reads. “The COLA for 2022 is 5.9%, which is also historically high. Currently, the average monthly Social Security benefit is $1,540, according to the latest figures from the Social Security Administration. A 10.8% COLA would increase that benefit to $1,694 — a bump of $154 a month.”
However, the prediction of such a rise is based on whether or not current levels of inflation will persist by the time the Social Security Administration (SSA) calculates the totals for 2023 recipients, the CRFB noted.
“If inflation were to slow down or completely stop for the remainder of the year, the COLA could be as low as 7.3%,” the report reads. “While some economists predict that the inflation rate may dip later this year in response to the Federal Reserve’s aggressive moves to tame it, it is very unlikely that inflation will halt entirely by the end of 2022.”
Other organizations making predictions about the 2023 COLA have ranged from 8% according to an SSA official, and 8.6% according to the non-profit Senior Citizens League, the Money.com report explains.
The idea of added Social Security benefits being “undermined” by inflation was posited last summer in a research brief published by the Boston College Center for Retirement Research (CRR). Still, a notable rise in the program’s COLA will likely make a big difference for American retirees, though the additional cash in seniors’ pockets from the bump could be undermined by other rising costs that threaten retirement stability, researchers said.
Most reverse mortgage originators seem to agree that the COLA makes for a welcome adjustment to their clients’ pocketbooks but may not have an abundance of impact in terms of their continuing need for the product, according to previous outreach conducted by RMD.
Since Social Security can frequently be the only source of income for a segment of seniors, there are some concerns that borrowers could have to face beyond just incorporating the COLA into their benefits.
Read the report at Money.com.