Social Security COLA increase: There’s a change in projected cost-of-living raise

The latest projections for next year’s Social Security benefits show a slight decrease.

Mary Johnson, Social Security and Medicare policy analyst for the Senior Citizens League, said August consumer price data shows a “weakness in (the) inflation adjustment system” used to determine the increase. The latest COLA increase estimate is 8.7%, almost a full percentage point from the 9.6% the League predicted last month.

That reflects a significant drop in the Consumer Price Index, or CPI-W, the index that Social Security benefits are based on. It has decreased even more, by 1.10 percentage point year-over-year to 8.7%. It’s the second straight month CPI-W has decreased.

READ MORE: Social Security COLA may be largest in 40 years: When will amount be announced? How much will it be?

This change was driven by a drop in gasoline prices, Johnson said, along with flaws in the way the increase is calculated.

“One of the biggest issues in using the CPI-W to calculate the Social Security COLA is the fact that it does not track the spending of retired households age 62 and up and gives greater weight to gasoline and transportation costs. A significant drop-in gasoline prices played an outsized role in why my COLA estimate has dropped,” Johnson said.

Overall, however, retired and disabled Social Security recipients spend more of their income on healthcare, housing and food and less on gasoline, meaning the CPI-W may not adequately reflect senior spending and needs.

READ MORE: Social Security benefit increase 2023: When will we know next year’s COLA?

A COLA of 8.7% would increase the average retired benefit of $1,656 by $144.10. And while lower than projected, there have been only three other times since the start of automatic adjustments that it was higher – 1979, 1980 and 1981.

There is only one month of consumer price data left to go before the increase is announced. The Social Security Administration announces the COLA on Oct 13 after the release of the September consumer price index.

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