But still, either way, there’s a strong possibility that Social Security benefits will get a generous raise in the new year. Whether that’s something to celebrate, though, is a different story.
Seniors are already losing buyer power
At first, 2022’s 5.9% COLA seemed like a great thing for seniors. But so far, beneficiaries are already losing buying power because the rate of inflation is outpacing their COLA, which they’re limited to for the entire year.
If high levels of inflation persist, seniors could end up seeing a COLA in the 7% range in 2023. But that may not do them much good. Chances are, if that high a COLA comes through, it will simply be wiped out by higher living costs.
Furthermore, Medicare costs have been rising steadily, and that’s done a good job of eroding COLAs in recent years. If Medicare Part B premiums increase a lot in 2023, seniors could end up in a serious financial crunch even if their COLA is extremely generous.
Don’t rely on Social Security alone
It’s too soon to predict exactly what raise seniors on Social Security will be in line for in 2023. But it’s also fair to say that no matter what it is, it probably won’t be enough.
In fact, the limited power of COLAs should be reason enough to motivate today’s workers to not rely too heavily on Social Security in retirement, but rather, take steps to build savings of their own. As it is, Social Security will only replace about 40% of the average worker’s pre-retirement wages. And so retiring on those benefits alone could set the stage for a world of financial hardship.