Are you trying to guess next year’s Social Security increase? Do this instead.
The next Social Security cost-of-living adjustment, or COLA for short, could be a big one. This year, seniors’ Social Security benefits increased by 5.9% due to inflation. But inflation has been even more ferocious in recent months and is unlikely to slow down drastically in the near term.
This is significant because the third quarter inflation data is used to calculate Social Security COLAs. Once this data is available, the Social Security Administration compiles the figures and releases details of the following year’s COLA, usually in the first half of October.
Meanwhile, various COLA estimates are being tossed around based on recent inflation trends. Some say seniors expect their Social Security income to increase by 8.6% in 2023. Other estimates are for an increase of almost 11%.
But while you might be curious about what kind of raise you’re up for, trying to guess that number really isn’t a good use of time. A better bet is to take steps to rethink your budget and try to increase your retirement income. Because the chances are good, no matter what the Social Security COLA looks like next year, it will come up short.
Don’t just rely on one big COLA
Last fall, seniors were thrilled to hear they would be getting a 5.9% COLA for 2022. But so far, that increase hasn’t kept pace with inflation, leaving many of them pocketing pennies to stay afloat.
For that reason, it really isn’t worth spending time figuring out what the Social Security COLA will be next year. Whether in the 8% range, above or below, the reality is that it probably won’t give you the purchasing power you’re looking for.
Remember: every raise you get is tied to inflation. So if next year’s COLA is a lot more generous than this year’s, it’s only because the cost of living is so much higher.
If you’re looking to thrive financially in 2023, or simply want to avoid falling behind, you should do a thorough research on your budget and see if it’s possible to cut some expenses. That could mean downsizing to a smaller home or going from a two-car household to a one-car household.
At the same time, you may want to explore ways to increase your income. If you have a larger home that you don’t think you’ll downsize, you can try renting out part of it instead.
Or a part-time job is always an option. There are many remote part-time jobs these days. So if you’re concerned about working (or just don’t want to) in a public setting, that doesn’t mean you won’t be able to find work.
let’s wait and see
Next year’s Social Security COLA hasn’t been announced for months. Instead of worrying about the details, spend your summer finding ways to shore up your finances ahead of 2023.
There’s a good chance next year’s Social Security COLA will be the biggest seniors have seen in decades. But whether that actually does anything for your finances is another story entirely.