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  • Stephanie O. Joy, Esq.

2023 COLA - The Silver Lining To Inflation?

Updated: Sep 6

Note: This article/video is for general information only and is not legal advice to any particular reader or individual. For legal advice, you must specifically retain a lawyer who evaluates your specific situation.

Inflation is an undue burden on all of us today. Who is not feeling the pinch? It is especially difficult for many disabled folks or seniors with fixed incomes. Many cannot add a part time job to their existing activities. Many of these neighbors, maybe even you, rely largely on Social Security Retirement benefits, Disability benefits, Survivor benefits, or Dependent benefits from a worker in the family.


There is a tiny silver lining for those receiving Social Security benefits. Each year, shortly after the fiscal end-of-year for the Social Security Administration (SSA) announces the Cost-of-Living Adjustment (COLA). The fiscal year-end is the last day of September. We are NOT there yet, as of this writing, but we are close, and there are expectations. Scroll down.


Prefer to listen/watch? This video tells you what you may want to know:


What is the COLA? The important purpose of the COLA is to make sure that the buying power of the benefits (Social Security and Supplemental Security Income (SSI)) is not diminished by inflation. COLA has been law since 1972 and automated since 1975. Prior to 1975, to get an increase, Congress had to proactively enact special legislation. Can you imagine having to wait for Congress to act? Fortunately, the automatic COLA is in play and does not seem to be going anywhere. Here is the Math: To determine the COLA that will take place for 2023, the SSA will take the percentage increase in a specific consumer price “index”[1]. The CPI-W level is determined by the Department of Labor. It will look at two figures -


1) the prior level of the CPI-W from the 3rd quarter of the last year that a COLA was determined, in this case 2021[2], and


2) the CPI-W from the 3rd quarter of the present year, 2022


Did it increase and, if so, by what percentage? If there is no increase in those two price index levels, there will be no COLA. (There was no COLA for 2010, 2011 and again in 2016, for the first and only times in history.)


Critics: Some critics of the CPI denounce that it omits important costs of living items. These omissions include those funded by the government, as paid for by taxpayers, and not ‘out of pocket’ by the recipient. As such, the omissions include expensive costs such as Medicare, and Medicaid. It also omits Education, a massive expense to the taxpayers. Therefore, the CPI-W is said to substantially underweight the actual costs of living by the very people it is intended to cover.[1]


Possible COLA for 2023: In this case, as of this writing, educated speculation by economists is forecasting one of the highest COLAs in decades, possibly since the early 1980s.[3] I am seeing forecasts in the 8.9-9.5% range, give or take.[4] One advantageous aspect afforded Social Security beneficiaries is that the COLA never reverses itself in a later year. Once beneficiaries’ benefits increase by, say, 9%, they will never be taken away (as per current law, which is not expected to change as far as I know).


We All Benefit from COLA, Now or Later: As for those not collecting Social Security yet? Rest assured that your primary insurance amount (PIA) that you have already earned by working, or will earn later, also gets this year’s COLA applied to it. That way, when you do eventually collect your paid-for benefits one day, they will already have been adjusted by this COLA and all others. As such, as you work now, your insurance amount for later is growing silently, in the background of your life.


Inflation is an undue burden on all. Perhaps we will be lucky, prices will simmer down and normalize sooner rather than later, and those receiving the COLA for 2023 will find themselves largely unscathed by the current difficult cost of goods and services in our areas.


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---------------- [1] Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Note that many believe that the SSA should be using the newer CPI-E, which more appropriately weights those goods/services used more by the elderly, a big component of Social Security beneficiaries, as a portion of their overall expenses relative to income. For instance, CPI-E more than doubles the weight applied to healthcare expenses in CPI-W, since the elderly must spend more on that than other folks, relatively (and the Medicare premium increase can eat up the COLA). There is a similar but much smaller increase in the weight applied to “housing”. Other weights, however, decrease in the CPI-E, such as communication, food, apparel, transportation, recreation and “other goods and services. https://seniorsleague.org/ask-the-advisor-august-2011-advisor/ (One may separately wonder, however: what comes first, the chicken or the egg - does food, clothing and recreation in our senior years reduces because seniors don't care to purchase it, or does it reduce b/c fixed incomes have to prioritize medicine and mortgage/heat, over those items?) [2] There are some years, where there is no determined COLA, because inflation did not raise the CPI-W. It either remained stagnant or decreased. The COLA never decreases with an inflationary reversal – it stays the same so benefits do not decrease even if prices go down. Mathematically then, the next COLA increase will incorporate all those up and down changes that occurred from the last increase to the present, which can cover at least one year but possibly more. [3] 1979 -- 9.9%; 1980 -- 14.3%; 1981 -- 11.2%. https://www.ssa.gov/cola/ [4] https://www.marketwatch.com/story/how-big-a-social-security-cola-can-retirees-expect-in-2023-11661615640

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