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SmartAsset: Your Social Security Benefits Could Rise by as Much as 8.6% in 2023

High inflation has pinched many wallets this year, but perhaps none so much as retirees’. Not only do rising healthcare costs rank as one of the most pressing concerns for Americans on a fixed income, jumping prices have put even more strain on those budgets. In 2020, life events affected retirement timing for nearly half of all Americans, and with high inflation and a sinking stock market, those very same retirees may soon find their retirement at risk.

A financial advisor could help you plan your retirement and select investments that align with your financial goals. Speak to a qualified advisor today.

The Senior Citizens League Estimates a Huge Drop in Buying Power

An ongoing study conducted by The Senior Citizens League (TSCL) indicates that high inflation has caused Social Security benefits to lose 40% of their buying power since 2000. Social Security purchasing power plummeted 10 percentage points alone from March 2021 to March 2022 – the largest drop recorded to date.

Comparing the Social Security Cost of Living Adjustment (COLA) with price increases in a basket of goods typically purchased by retirees, TSCL found that prices rose across the board, with a steep 14.5% increase in Medicare Part B premiums alone. For a quarter of survey respondents, after deducting their total health and drug plan premiums, the 2022 COLA only increased their available Social Security benefit by less than $25 a month.

Since 2000, typical retiree expenditures have risen a whopping 130% while Social Security benefits have grown 64% with adjustments. Basically, “for every $100 a retired household spent on groceries in 2000, that household can only buy about $60 worth today,” the study authors wrote.

Because costs are rising so much faster than COLA, the researchers concluded that an average Social Security payment would need $539.80 more per month in order to maintain the same level of buying power as in 2000. As a result, based on Consumer Price Index data through April, the 2023 COLA may reach 8.6%, the highest since 1981.

The chart below, based on Bureau of Labor Statistics data, gives a sampling of how inflation has cut into retiree spending power.

Fastest Growing Costs of Older Americans, March 2021-March 2022
Item Cost in March 2021 Cost in March 2022 Percent increase since March 2021
Home heating oil, per gal $2.86 $5.13 79%
Gasoline (all grades), per gal $2.86 $4.33 51%
Propane, per gal $2.33 $2.98 30%
Eggs, per dozen $1.63 $2.05 26%
Bacon, per lb $5.85 $7.20 23%
Oranges, per lb $1.27 $1.48 16.5%
Coffee, per lb $4.67 $5.41 16%
Medicare Part B premium, monthly $148.50 $150.10 14.5%
Ground chuck, per lb $4.31 $4.87 13%

Congress Introduces Senior Citizens Inflation Relief Act

SmartAsset: Your Social Security Benefits Could Rise by as Much as 8.6% in 2023

House Rep. Bill Posey (R-IL) recently introduced a bill proposing a temporary solution for dealing with inflation. Called the Senior Citizens Inflation Relief Act, the bill aims to increase the amount of money an individual can earn while still receiving Social Security benefits.

Currently, the law allows retired individuals under full retirement age to continue to earn income subject to Social Security’s Earning Restrictions rules. Upon reaching the age of full retirement – age 67 for those born after 1960 – retirees are no longer limited by those restrictions. In 2022, that amounts to earning $19,560 a year or $1,630 per month.

To help seniors battling increased costs due to current inflation levels, Posey has proposed increasing those income limits in 2022 and 2023 to $2,046.67, or $24,560 a year. This equates to $416.67 more a month that seniors can earn to compensate for higher costs.

While not as much as the $539.80 the TSCL estimates retirees would need in order to maintain full buying power, “[it] could certainly make a big difference over two years. That could cover a rental increase, a car payment, several weeks’ worth of groceries, without penalizing this group of younger Social Security recipients for working and trying to make ends meet,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.

Bottom Line

SmartAsset: Your Social Security Benefits Could Rise by as Much as 8.6% in 2023

The Senior Citizens League has recently released results from its ongoing COLA study, indicating that Social Security benefits have lost 40% of their buying power since 2000. The organization estimates that 2023 COLA could jump by as much as 8.6% to compensate for higher inflation and costs. At the same time, House Rep. Bill Posey has introduced a new bill proposing to allow younger retirees to earn roughly $400 more per month without reducing their Social Security benefits.

Retirement Planning Tips

  • Not sure if you have enough saved to last throughout your retirement? For a solid, long-term financial plan, consider speaking with a qualified financial advisor. SmartAsset’s free tool matches you with up to three financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
  • Use SmartAsset’s free retirement calculator to get a good first estimate of how much money you’ll need to retire.

Photo credit: ©iStock.com/JLco – Julia Amaral, ©iStock.com/stockstudioX, ©iStock.com/baona

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