In mid-October, retirees will get some important news from the Social Security Administration. It’s news that many people have been waiting for, and it will have a profound impact on the finances of seniors across the country.
The cost of living adjustment for Social Security will be announced soon
So, what’s the big news? It’s the cost of living adjustment (COLA) that retirees can expect in 2023. It reveals the cost of living adjustment (COLA) for seniors. social Security Checks will increase next year.
COLA is included in the Social Security benefits program for an important reason: The price of goods and services increases over time. If retirement checks are fixed at a set amount and never increased, retirees will lose drastically their purchasing power over time. Their benefits will be very little in real terms by the end of their retirement.
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To avoid this, the program is designed to achieve periodic increases in benefits. In most, but not all, years, this means that older adults see their paychecks increase. And they’ll soon find out how much. The COLA . ad It’s expected sometime around October 13, although the exact date has yet to be determined.
Why will COLA be announced in October?
If you’re wondering why that big announcement was made in October when the COLA takes effect in January, there’s a simple answer: That’s when the Social Security Administration first discovers how huge the benefits increase can be.
See, the formula used to calculate COLAs involves comparing the cost of goods and services according to the Consumer Price Index. The pricing index used is the Consumer Price Index for urban wage earners and clerical workers (CPI-W). This indicator measures the cost of a “basket” of goods and services, including housing, health care, and transportation.
CPI-W numbers are compared from year to year, and COLA is based on percentage increase. But the Social Security Administration doesn’t take into account index numbers for the full year — only for the third quarter of the year before the increase is announced.
Therefore, the CPI-W numbers from July, August, and September are the relevant numbers used to calculate how much prices have risen on average. Since September data comes out at the beginning of October, the Social Security Administration will be able to calculate the 2023 benefit increase and announce it around the middle of the month.
Despite this, retirees shouldn’t get too excited. Remember, although this is often referred to as an “increase”, it is only meant to ensure you don’t buy your checks lower than before. It is not intended to enable you to purchase more Than you used to do in the past – just to pay for things you always bought that are now more expensive.
So keep an eye out for COLA’s announcement in the coming weeks so you can plan how much extra money is coming in – but also be sure to keep a close eye on your budget for 2023 so you don’t spend too much during this time of high inflation.
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