Your 11% Social Security Raise Isn't Happening. Here's Why That's Not a Bad Thing.

When seniors on Social Security saw their benefits go up by 5.9% in 2022, it represented the program's largest cost-of-living adjustment (COLA) in decades. But 2023's COLA will probably make that 5.9% boost seem negligible.

As much as inflation started ticking upward during the latter half of 2021, it's really been soaring this year. And because Social Security COLAs are tied directly to inflation, there's reason to believe that 2023's raise will be huge.

Earlier this year, some experts were calling for a COLA as high as 11% in 2023. But based on more recent inflation data, an 11% boost is looking unlikely. That's not necessarily a bad thing, though.

Social Security cards.

Image source: Getty Images.

Seniors will still see a giant bump

Social Security COLAs are based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). To be clear, when we see news outlets report on inflation, they're usually referring to changes in the Consumer Price Index for All Urban Consumers (CPI-U). The CPI-W is a subset of the CPI-U, and it's based on the expenditures of families in urban areas who meet specific employment requirements.

In August, the CPI-W notched downward slightly compared to July. And in July, the CPI-W dropped a touch compared to June.

All of this modest movement clearly isn't reflected in the cost of consumer goods because Americans are still paying a fortune for everything from food to apparel to utilities. But downward movement in the CPI-W makes an 11% COLA far less likely to happen in 2023.

Granted, we'll need three months' worth of CPI-W data from July, August, and September to make that determination. And if the index rises substantially this month, that 11% COLA could be back on the table. But that's not expected to happen.

So, what COLA should seniors anticipate in 2023? It's hard to say. But it certainly won't be shocking to see a raise somewhere in the 9% vicinity. And that's a boost seniors might celebrate.

Seniors shouldn't hope for sky-high inflation

While the idea of an 11% Social Security COLA might seem nice, the reality is that for next year's raise to be that high, inflation will need to tick upward in September. And that's not something anyone should be wishing for.

As it is, Social Security COLAs often do a poor job of helping seniors maintain their buying power in the face of inflation. So if next year's raise isn't quite as high as earlier estimates were calling for, it means that inflation will have to moderate to some degree, thereby spelling relief for working Americans and seniors alike.

Most years, seniors on Social Security end up losing buying power based on the COLAs they get. And part of the reason is that the CPI-W is not a very accurate measure of the costs seniors face.

Lawmakers have been pushing for a different way to calculate Social Security COLAs. But until that change comes down the pike, seniors should recognize that larger COLAs aren't necessarily the financial windfall they might seem like.

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