This year’s skyrocketing inflation rate has almost ensured that in 2023, Social Security recipients will receive their highest cost of living adjustment in 41 years. Based on the latest consumer price data, the estimated Social Security COLA for 2023 is 8.7%, according to the Senior Citizens League, a nonpartisan seniors advocacy group. If that happens, it will be the biggest annual rise since the 11.2% COLA in 1981.
Even if the 2023 COLA doesn’t end up hitting 8.7%, you can expect the smallest possible adjustment to still be very close – probably around 8.5% to 8.6%.
The COLA is based on the consumer price index for urban wage earners and office workers. It is calculated using the average inflation rate for the third quarter of the year. When these numbers are released, the July, August and September data will be added together and divided by three to get the average. The number for 2022 will then be compared to the average for the third quarter of 2021 to determine the percentage change for 2023.
Technically, the smallest possible COLA is 0%, which has only happened three times since 1975, according to the SSA. For you to get a 0% COLA in 2023, CPI-W would need to reverse trend and plunge almost 25% from August to September, Motley Fool reported. The probability of this happening is somewhere between zero and the fraction closest to zero.
It’s also possible that the CPI-W could match its biggest ever one-month drop of 2.3%, which would push the 2023 COLA to 7.9%. But again, given recent inflationary trends, the odds of that happening are next to nil.
A more realistic scenario is that CPI-W in September will decline at a slightly faster pace than the previous two months. As noted by Motley Fool, CPI-W in July fell 0.1% from the previous month, and CPI-W in August was down another 0.2% from July. Following this trend, the CPI-W for September could fall by 0.3% month-on-month. If that happens, the COLA for 2023 would be around 8.6%.
If inflation declines at twice the recent trend, the 2023 Social Security COLA would still be 8.5%. That’s about the lowest you should expect, according to Motley Fool’s estimates.
In any case, you will soon know for sure. The SSA expects to announce the 2023 COLA by mid-October.
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This article originally appeared on GOBankingRates.com: Social security COLA: what is the smallest amount to be expected in 2023?