Every year the Social Security Administration adjusts payments for benefits using the COLA formula and the CPI-W. But what will this do for the 2023 COLA boost?
The rate of inflation for 2022 is one of the highest in recent history. By August, the inflation rate had surpassed 8% for the year. Now, things need to be adjusted for inflation and one of those things are Social Security payments.
Retired Americans who collect Social Security can expect larger payments each month in 2023. Most people collecting benefits use the money to live. These funds pay for seniors to survive. They often use the money for food, utilities and medications. All of these things have gone in price thanks to inflation.
Overall, seniors have drastically lost purchasing power throughout the years. 88% of Americans past the age of 65 receive some sort of payment they use as income. Not only are they struggling to live, but the birth rate falling and life expectancy rising is depleting funding as well.
There are three changes that could have a huge influence on COLA and Social Security payments
According to Marca, there are ways that retired seniors could be better protected. This is for when it comes to maintaining their purchasing power.
First, when adjusting rates with the COLA formula, the Administration could use the CPI-E instead of the CPI-W. The CPI-W is the Consumer Price Index for Urban Wage Earners and Clerical Workers. It tracks inflation rates for things like goods and services, down to the item.
The CPI-E is the Consumer Price Index for the Elderly. This gives a much more accurate picture for inflation and its impacts on the elderly, yet it isn’t what is used to increase benefits with COLA. It’s been introduced through the Social Security Expansion Act as a better way to determine COLA.
If this was used instead of the CPI-W, seniors would be able to maintain their purchasing power and would receive adequate boosts to survive on.
Another change would be to apply the Social Security payroll tax to more income. This move would tax all income past $250,000, taxing the wealthy. This could help resolve the issue of a shrinking Social Security fund.
Finally, another solution would be to implement larger increases to those who end up living longer. Overall it would be a 5% increase. Each year, a beneficiary’s amount would increase by 1% from the ages of 78 to 82.
SSI payments worth up to $841 going out TODAY for the month of October
Samantha edits our personal finance and consumer news section. Have a question or lead? Send it to [email protected].