Social Security Department Announces 8.7% Raise
Inflation means we are all being asked to do more with less. Every paycheck gets stretched. Trips to the grocery store become a battle of “what to toss out of the cart before we get to the check stand so we aren’t embarrassed by too large of a bill.”
Have you tried buying a car lately? It used to be that you would only face markups if you were purchasing a rare or luxury vehicle, but now even base model economy cars are being priced at a premium. And forget about buying a car, what about gas and seven dollars per gallon in California?
These are all challenges that everyone is facing together, and fortunately, Uncle Sam has not forgotten about retirees on fixed incomes — the Social Security department announced on Thursday the largest cost of living adjustment since 1981 — an increase of 8.7% for 2023, reports the New York Times.
Why The Raise?
Just last year, we were bemoaning inflation when the Social Security agency announced a 5.9% raise. Little did we know then that five dollars per gallon gas would become seven dollars per gallon gas and inflation would reach levels that we haven’t seen since the 1980s.
The annual cost of living adjustments (COLAs) are based on the consumer price index, which is released by the Labor Department. The method for calculating each COLA is laid out in the Social Security Act. The methodology states that rises in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) serve as the foundation for a COLA formula. That essentially means that a bureaucrat at the Labor Department figures out how much prices are rising and then the Social Security Administration uses that data to figure out how much payments should rise.
This index tracks common prices for food, gasoline, and other necessities of life. And while few of us paid much attention to it last year (outside of the announcement of the 5.9% raise), it has been a figure that has been in the news all year in 2022, as it is the primary measure of inflation. The constant increases in the CPI have led to interest rate hikes as an attempt by the government to slow the rate of inflation. And since the law requires Social Security checks to be adjusted for inflation as well, benefit recipients will get a larger-than-average raise this year. In fact, it’s the biggest adjustment in almost forty years.
When Will The Raise Take Effect?
Like last year, the raise should take effect with your December 2022 benefits, which are paid in January 2023. For those receiving SSI, your payment date may vary — typically, you are paid on the first of the month but January 1 is a holiday, so you will likely get your first bigger check at the end of December.
Do I Have to Do Anything to Get My Raise?
No. These raises are automatic and called for by law — your check will be adjusted without any action on your part.
Is 8.7% Enough?
If you’re like many people, waiting all year for this COLA has been hard – the cost of everything has gone up and there has been little to no relief from the government. Quite frankly, while 8.7% is a nice raise, it probably won’t close the gap for those living in high-cost areas, such as California or New York City.
If you are struggling to make ends meet, there are organizations such as food banks and Meals on Wheels that may be able to help. Check out our post on working part-time while receiving Social Security benefits as well to see if you can add a side business to your income while maintaining your benefits.