If you’re feeling the pinch of inflation right now (and who isn’t?), there could be good news in store later this year when Social Security announces its annual cost of living increase.
The Senior Citizens League, a nonprofit advocacy group, is currently estimating that in 2023, Social Security retirement and disability benefits will increase by 8.9 percent.
That would be the biggest year-over-year increase in benefits since 1981, and the fourth largest ever. For comparison, benefits increased 5.9 percent in 2022. For many years, the annual cost of living adjustment only increased by 1-2 percent.
To calculate cost of living increases, Social Security uses the CPI for Urban Wage Earners and Clerical Workers. This is a slightly different way of calculating inflation than what you might read about in news articles.
It actually represents a larger percentage of the American population, and pegs inflation at a slightly higher rate.
The annual cost of living adjustment will go into effect for those receiving either Social Security Disability or Supplemental Security Income benefits, though with disability insurance benefits tied to earnings, individuals receiving those benefits would see a higher increase in their monthly benefits.
And of course, all of this is speculation at this point. While the current inflation numbers indicate that disability recipients will see a substantial increase in benefits next year, a sudden change in the economy either way could mean that estimated 8.9 percent benefit increase or decrease by quite a bit before the official cost of living adjustment numbers are announced in October.