Social Security beneficiaries are on set to get the largest cost-of-living increase in four decades as sky-high inflation rapidly erodes the purchasing power of retired Americans.
Based on March inflation data, which showed that consumer prices rose 8.5 percent from the previous year, the fastest year-over-year increase since December 1981, the Senior Citizens League, a nonpartisan group that focuses on issues affecting older Americans, estimated the adjustment could be as high as 8.9 percent.
The yearly Social Security adjustment is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W. It increased 9.4% over the previous year.
Biggest Payment Increase in 40 Years
In an interview with FOX Business, Mary Johnson, a Social Security analyst for the Senior Citizens League, said she had never witnessed estimates as high as currently indicated.
"The 8.9% would be the highest since 1981," she said.
If Social Security recipients enjoy an 8.9% increase in their monthly checks next year, it will be the largest yearly increase since 1981, when they saw an 11.2 percent increase. According to the Senior Citizens League, the COLA for 2023 might be 7.6 %.
The Social Security Administration will determine the final adjustment percentage in October, per Money report. The payment adjustments will be implemented in January 2023.
The forecast is still susceptible to change, and it all depends on whether inflation has reached a plateau or will continue to grow.
Several experts believe there are signs that inflation is slowing, citing a surge in gas costs as the cause of much of the price increase last month. With the exception of gas and food, which are more volatile indicators, core inflation slowed somewhat between February and March.
But other economic experts stated that the outlook is still uncertain as global markets are at risk due to volatile factors like the Russia-Ukraine war and the COVID-19 pandemic.
According to the Senior Citizens League, Social Security benefits have lost nearly 30% of their purchasing power since 2000 due to insufficient adjustments that underestimate inflation and rising healthcare costs.
The group has lobbied Congress to pass legislation that would use the Consumer Price Index for the Elderly, or CPI-E, to index the adjustment to inflation exclusively for seniors. The spending of households with adults aged 62 and up gets tracked by this indicator.
Financial Advice for Seniors
Meanwhile, financial experts offer some advice on how seniors can cope with the rising prices of goods, per CNBC.
According to CFP Michael Finke, professor of asset management at The American College of Financial Services, the best thing older individuals can do to safeguard their income from inflation is to delay claiming Social Security, which will, in effect, buy more Social Security benefits.
He said you could raise your "inflation-protected income" by 8% for each year you delay retiring after reaching full retirement age, up to age 70.
Marguerita Cheng, a financial counselor, suggests that you account for price increases in your budget to see how much you're spending and where you might need to cut back.
Putting off vacations or limiting unnecessary travel, for example, can help you save money on gas.
She added that having cash on hand will help you stay invested, so you won't have to sell any assets if you need money.
Cash, on the other hand, has a high risk against inflation since its purchasing value diminishes as inflation rises. Cheng advises considering dividend-paying stocks, growth stocks, and real estate if you want to focus on longevity to maintain your financial independence in retirement.
Related Article : Joe Biden Proposes 'Billionaire's Minimum Income Tax' Amid White House's Claims GOP Wants Big Tax Increase on Middle-Class Families
