In 2023, seniors receiving Social Security will receive a huge raise. Here’s how much you can expect | Business news

Social Security benefits can make or break retirement for many seniors. Millions of seniors rely on monthly paychecks to pay their bills, and for some retirees, Social Security is their only source of income.

For those living on fixed incomes, rising inflation over the past year has made retirement more challenging. Fortunately, seniors can get a historic raise in 2023. Here’s how much you can get.

Big changes await us in 2023

Almost every year, seniors will receive Social Security cost of living adjustment, or COLA. It’s an annual increase in benefits that helps your monthly check maintain its purchasing power as inflation naturally rises over time.

However, if inflation is rising faster than average, retirees can expect a larger COLA. Overall, the average COLA will fall by about 2-4% per year. This year, seniors received a whopping 5.9% COLA as inflation began to rise. And in 2023, the increase is almost guaranteed to be even greater.

No one knows for sure what the 2023 COLA will be yet, as the Social Security Administration won’t release an official number until October. But a recent report by the nonprofit advocacy group The Senior Citizens League suggests it could fall by about 9.6%, based on the latest inflation figures.

This figure also suggests that inflation will remain relatively stagnant for the rest of the year. If inflation is rising, the 2023 COLA could potentially reach 10.1%, according to the report. Either way, next year’s COLA could be the highest in more than four decades.

Why can’t this be good news

According to the latest figures from the Social Security Administration, the average retiree receives about $1,670 a month. If seniors receive a 9.6% COLA in 2023, that would be an increase of about $160 a month.

While that extra cash can go a long way toward meeting day-to-day needs, Social Security still faces a major problem: benefits quickly lose purchasing power.

Annual COLAs are supposed to help pay keep pace with inflation. However, historically, they have missed the mark. Despite ​​​​these annual COLAs, Social Security actually has lost about 40% of its purchasing power since 2000, according to a separate report by the Senior Citizens League.

In the last 12 months alone, inflation has risen by 8.5%. However, seniors only received a 5.9% COLA this year, meaning retirees still lost a significant amount of purchasing power despite the big increase in benefits.

To be clear, this does not mean that the COLA itself is not beneficial to retirees. When inflation is on the rise, any extra money in aid can make all the difference. However, even an unusually large COLA will not necessarily increase your disposable income.

What does this mean to you?

There’s not much you can do to fight inflation or increase your retirement benefits, but keeping realistic expectations can be helpful.

Social Security is not as reliable as it used to be, and if benefits continue to lose purchasing power, they may become even less reliable in the future. While you can expect bigger checks in 2023, it’s smart to be as realistic as possible about how far that money will go.

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