Social Security COLA Was Nearly 50% Behind Inflation in 2022 — What It Could Mean for 2023
Imagine getting a $92 monthly raise at the beginning of the year and then seeing your average monthly expenses rise by more than $130 for the rest of the year. That’s what most Social Security recipients faced in 2022.
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A 5.9% cost-of-living adjustment (COLA) in 2022 boosted the average payment for Social Security recipients to $1,656 a month from $1,564 in 2021, according to a new report from the Senior Citizens League, a nonpartisan seniors advocacy group. But with inflation running at 8% or higher for most of the year, the 2022 COLA was outdated almost as soon as it kicked in.
The Senior Citizens League estimates that the 2022 COLA fell short of actual inflation by an average of 46% a month. The average Social Security payment fell short by $42.35 per month, or more than $508 for the full year.
Even with inflation easing — it fell to 7.1% in November, marking its first dip below 8% since February — the rate is still well above the 5.9% COLA.
One result is that a rising number of U.S. seniors are living in or near poverty. Recent surveys of adults aged 65 and older by the Senior Citizens League found that one-third of survey participants reported applying for food stamps or visiting a food pantry over the past 12 months. That’s up from 22% in 2020. The survey also found that 17% of respondents have applied for assistance with heating costs, up from 10% in 2020.
“If you are helping or gifting older family and friends this holiday season, these items are a great starting point for thoughtful giving that can make a big difference,” Mary Johnson, the Senior Citizen League’s Social Security and Medicare policy analyst, said in a statement.
Helping seniors with heating costs will also be important, whether they use natural gas, electricity, oil or coal.
“You know things are bad when we are hoping Santa will leave coal in our stockings,” Johnson added. “When sending warm wishes to family or friends in need, try adding gift certificates for home heating oil, natural gas, or electricity. A heated electric mattress pad or warm fleece base layers will earn you hugs for life.”
Food and heating weren’t the only costs to go up in 2022. Standard Medicare Part B premiums also rose 14.5% from the previous year to $170.10 a month, though that figure will drop to $164.90 in 2023.
Meanwhile, Social Security recipients will be getting a major boost in 2023 thanks to an 8.7% COLA – the highest in more than 40 years. The COLA will push the average payment up by $146 a month. With inflation beginning to cool, and the Federal Reserve determined to keep bringing it down through interest-rate hikes, seniors should be much better positioned financially heading into the new year.
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“The good news … is people are realizing 100% of the 8.7% lift,” David Freitag, a financial planning consultant and Social Security expert at MassMutual, told CNBC.
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