Inflation started to cool down in July, but a non-profit advocacy group still said that it anticipates the highest Social Security cost-of living-adjustment (COLA) since 1981.
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Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League (TSCL), said in an emailed statement that based on new Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) data through July, it appears the COLA for 2023 will be 9.6%.
"If inflation runs 'hot' or higher than the recent average, the COLA could be 10.1%. If inflation runs 'cold' or lower than the recent average, the COLA could be 9.3%," she added. In turn, the COLA would increase the average retiree benefit of $1,656 by $159, according to TSCL.
The (CPI-W) increased 9.1% over the last 12 months. For the month, the index declined 0.1% prior to seasonal adjustment, according to the Bureau of Labor Statistics (BLS), which released its CPI for July on August 10. The all-items index for the 12 months ending July, which was driven largely by falling gas prices, decreased to 8.5%.
Johnson said that "there are only two months of consumer price data left to go," as the Social Security Administration (SSA) is set to announce the COLA on October 13, 2022. "A high COLA will be eagerly anticipated to address an ongoing shortfall in benefits that Social Security beneficiaries are experiencing in 2022 as inflation runs higher than their 5.9% COLA," Johnson said. "Based on inflation through July, we calculate that a $1,656 benefit is short about $58 per month on average and by a total of $373.80 year-to-date."
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COLAs are based on increases in the CPI-W. "A COLA effective for December of the current year is equal to the percentage increase (if any) in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective," according to the SSA website. If there is an increase, it must be rounded to the nearest tenth of one percent."
The latest COLA for 2022 was 5.9% for Social Security benefits and SSI payments.
Johnson also addressed the Inflation Reduction Act - which would allow Medicare to negotiate drug prices and caps out-of-pocket costs to $2,000 - saying that prescription drug costs are one of the fastest growing costs of any that retirees face.
"One thing that's bugging us right now is the claim that the Inflation Reduction Act strips $300 billion out of Medicare, Johnson said. "No tears here. Yes, it does and that's GREAT because this legislation cuts almost $300 billion worth of high drug prices in ten years. That represents savings for taxpayers and, more importantly, savings for Medicare beneficiaries on their share of prescription drug costs. The Senior Citizens League strongly supports this legislation."
Johnson added that "the cancer of unaffordable drug prices is responsible for financial distress, and worsening health and has even killed some older Americans who don't have enough resources to pay the price of their prescription drugs today."
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In addition, the prescription drug provisions in this bill received overwhelming support in the new Senior Priority Plan survey, Johnson said, with 79% of survey participants supporting it.
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This article originally appeared on GOBankingRates.com: Social Security COLA Expectations for 2023 Reach 9.6% Following Latest Consumer Price Index Report