7 Reasons Why Social Security COLA Could Increase In 2023

The Social Security Administration has revealed that it would be increasing the monetary amounts of the cost of living adjustments for 2019 and 2020. The consumer price index for urban wage earners and clerical workers will be used to calculate the cost of living adjustment, abbreviated as COLA for short (CPI-W).

Various factors might lead to an increase in the cost-of-living adjustment (COLA) that is applied to social security benefits in the future. To begin, inflation has been climbing steadily over the last several years, and it is quite probable that this trend will continue.

In recent years, the benefits provided by social security have not kept up with the inflation rate; hence, there is an opportunity for an increase in these benefits.

Key Takeaways

  • Reasons Why Social Security COLA Could Increase
  • 7 Reasons why social security COLA could increase in 2023
  • Current Rate of SS COLA
  • Proposed Increases to SS COLA
Reasons Why Social Security COLA Could Increase
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Reasons Why Social Security COLA Could Increase

The cost of living adjustment, often known as the COLA, is an annual increase in payments that are supposed to keep pace with inflation. Social Security beneficiaries get this increase. Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks changes in prices for urban consumers, serves as the foundation for the cost-of-living adjustment (COLA).

For various reasons, the yearly cost-of-living adjustment (COLA) for social security might increase in 2020. To begin, the CPI-W has been trending upward over the last several months, showing an increase of 0.4% in September and an increase of 0.5% in October. If this pattern holds through November and December, it may result in a more significant cost-of-living adjustment (COLA) for social security in 2020.

There has also been a general increase in energy costs owing to the Middle East unrest. If this trend continues, it may also increase the cost-of-living adjustment (COLA) for social security recipients.

Last but not least, the growth of prices has lagged behind the growth of salaries, which indicates that customers now have greater purchasing power. This may increase demand for goods and services, driving prices and contributing to a larger COLA for social security.

7 Reasons Why Social Security COLA Could Increase In 2023

The Cost-of-Living Adjustment is calculated by the Social Security Administration (SSA), and it is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (COLA).

The Consumer Price Index for Women (CPI-W) measures the change in costs incurred by city dwellers for a generic selection of consumer goods and services. The Consumer Price Index for Women is comprised of a total of eight primary categories.

These categories are as follows: food and drinks, housing, clothes, transportation, medical care, recreation, education and communication, and miscellaneous products and services.

The Social Security Administration (SSA) has indicated that the cost-of-living adjustment (COLA) for 2023 may reach 3.5%. This would be the most excellent cost-of-living adjustment (COLA) rise since 2010 when benefits increased by 3.6%.

Possible causes for a considerably larger-than-usual COLA in 2023 include:

1. For many people in the United States, Social Security is an essential component of their retirement plans, and the cost-of-living adjustment (COLA) that is implemented each year can make a significant impact on the amount of money that a person will have available to them at the end of their lives.

The United States Congress typically determines the cost-of-living adjustment (COLA) for social security payments, and it has been steadily rising since 2014.

2. If Congress continues along this path, the cost-of-living adjustment (COLA) for social security payments will be 3% in the year 2020, 4% in the year 2021, and then will climb by 2% annually until the year 2023.

This implies that anyone receiving social security benefits will, on average, get an additional $25 each month in 2023. This may amount to a significant sum for a person’s lifetime.

3. The annual cost of Social Security payments is in the billions of dollars, and inflation is always one of the primary causes of increased expenditures associated with these benefits. It is only standard that social security payments would grow every year following the inflation rate, which has averaged 1.9% over the last decade; thus, it is only natural that social security benefits would increase.

4. The cost-of-living adjustment (COLA) for social security is currently set at 2%, which is lower than the inflation rate. The trustees of Social Security have suggested raising the yearly COLA to 3% as part of their recommendation. Suppose the United States Congress accepts this plan and sets the new COLA at 3%. In that case, those who receive social security benefits will get an average yearly benefit increase of $24 beginning the following year.

5. The unemployment rate is anticipated to continue low, increasing costs for various products and services.

6. It is anticipated that in the year 2023, wages will increase, which will ultimately result in increased pricing for both products and services.

7. It is anticipated that the cost of living will continue to grow, resulting in increased pricing for various products and services.

Current Rate Of SS COLA

An increase in the Urban Wage Earners and Clerical Workers Consumer Price Index from the previous year’s third quarter to the current year’s third quarter is used to calculate the cost-of-living adjustment known as the COLA for Social Security. If there is an increase, such an increment takes effect with the payment for December, which is made in January.

So, what exactly does this imply for the year 2020? The Consumer Price Index for Women had a year-over-year rise of 2.8% between the 3rd quarter of 2018 and the third quarter of 2019. This would lead to a cost-of-living adjustment (COLA) of 2.8% for 2020 social security payments, which would begin being paid out in December 2019 and continue through the following year. However, before it is completed later this year, there is a chance that this figure may shift somewhat in one direction or another.

In October 2019, the Social Security Administration will formally announce the 2020 cost-of-living adjustment (COLA).

Proposed Increases To SS COLA

When a worker qualified for Social Security benefits retires, gets handicapped, or passes away, they and their families are entitled to receive benefits from the program. The program is financed by the payroll taxes that are paid by employees as well as the employers of those workers.

The Social Security Administration (SSA) calculates the cost-of-living adjustment (COLA) applied to beneficiaries’ payments annually. This estimate is based on the increase of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) (CPI-W). The Consumer Price Index for Women (CPI-W) measures changes in the prices urban consumers pay for a market basket of goods and services that make up the CPI.

It is necessary for there to be a rise in the CPI-W from the third quarter of one year to the third quarter of the following year for there to be an increase in the SS COLA. For instance, if the CPI-W grew by 2% between September 2020 and September 2021, the rise in social security payments would be 2% the following year, in January 2022.

The Social Security Administration (SSA) has said there would be an increase of 0.3% in social security payments in 2021. This is due to the Consumer Price Index for Women rising by 1.6% between September 2019 and September 2020.

Even if this is excellent news for those receiving social security, this increase falls short of keeping pace with inflation. The Consumer Price Index for Women recorded an inflation rate of 2.4% during the same period. This indicates that social security payouts’ buying power is decreasing yearly.

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Conclusion

We hope this post has helped clarify some factors that may cause the social security COLA to rise in 2023. The possibility of a social security COLA hike in 2019 is uncertain; nonetheless, it is something to be wary about.

In any event, we hope that our advice has assisted you in determining the best way to handle your money so that you may have a pleasant retirement.

FAQS

When Will Cola For 2023 Be Announced

How Long Do SNAP Benefits Last? For instance, the SSA disclosed the 2022 COLA the same day as the September CPI announcement last year. An SSA representative verified the 2023 COLA’s October release date with the website VerifyThis.com.

Will There Be A Cola Increase For Social Security In 2023

Benefits for Social Security recipients will increase by 8.7% due to a cost of living adjustment, or COLA, beginning in January 2023. (Recipients of Supplemental Security Income will get their first check with an increase in December.)

What Will The Social Security Cola Be For 2023?

Benefits for Social Security recipients will increase by 8.7% due to a cost of living adjustment, or COLA, beginning in January 2023. (Recipients of Supplemental Security Income will get their first check with an increase in December.)

You can learn more from the video below:

About Author

Reasons Why Social Security COLA Could Increase
Lydia Alolade
I am a professional article and e-book writer with 4 years of experience, I write on well research content on cryptocurrency, stocks, loans and finances.

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