Average Social Security Payments Could Hit $1,800 Owing to Inflation

Average Social Security Payments Could Hit $1,800 Owing to Inflation
Seniors shop for groceries during special hours open to seniors and the disabled at Northgate Gonzalez Market, a Hispanic specialty supermarket, in Los Angeles, Calif., on Mar. 19, 2020. (Mario Tama/Getty Images)
Naveen Athrappully

Inflation could drive up Social Security payments by a record-high level next year due to inflation, with average payments reaching $1,800, according to an analysis by the Senior Citizens League, a nonpartisan group that focuses on issues related to older U.S. citizens.

Based on the inflation data through August, the Senior Citizens League estimates the Social Security cost-of-living adjustment (COLA) for 2023 will be at 8.7 percent, the group stated in a press brief on Sept. 13. An 8.7 percent increase would push up the average retiree benefit by $144.10, which would take such payments from the current $1,656 to $1,800.

“A COLA of 8.7 percent is extremely rare and would be the highest ever received by most Social Security beneficiaries alive today. There were only three other times since the start of automatic adjustments that it was higher (1979–1981),” the brief states.

The Social Security COLA is aimed at retaining the buying power of benefits. Without COLA, Social Security payments will not keep up with inflation, with the result that people will only be able to buy less with the benefits they receive. This would create stressful hardship for older Americans.

COLA increases are permanent and will keep increasing the Social Security income people receive during their retirement period.

The Senior Citizens League expects the Social Security Administration to announce next year’s COLA on Oct. 13, 2022, once the September Consumer Price Index (CPI) data, a measure of inflation, is released.

The 12-month CPI in August came in at 8.3 percent, hovering near the four-decade high of 9.1 percent CPI registered in June. Since the beginning of this year, the 12-month CPI has not fallen below 7.5 percent.

Enduring Financial Hardships

In a Sept. 14 brief, Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League, pointed out that Social Security payment receivers have “fallen behind financially” due to inflation.

“The buying power of Social Security benefits has occasionally improved in the past, but that may not be enough when retirees have spent down their savings to stay afloat in years when inflation was going up. The lifeboat is leaking and taking on water, leaving older Americans at risk of financial drowning,” she said.

A survey by the Senior Citizens League conducted in February 2022 among senior citizens found that 50 percent of respondents had spent their emergency savings due to inflation and 14 percent applied for rental assistance.

In addition, 44 percent carried on a consumer credit card debt for over 90 days and 48 percent visited a food pantry or applied for food stamps, which is more than double the 22 percent reported in October 2021.

Another downside of COLAs pushing up Social Security payments is that it might end up hurting the eligibility of low-income assistance recipients to receive such assistance.

According to the Senior Citizens League, roughly 14 percent of participants in a survey said that their low-income assistance fell in 2022 due to higher Social Security benefits.