At last, this month will decide how over 68 million Americans’ Social Security benefits will be adjusted.
This is the end of all the forecasts that have been appearing since the middle of the year, and for the rest of this year at least, you will not need to closely monitor inflation.
However, it is greatly welcomed to understand the thought process and rationale behind this modification.
The annual increase in your Social Security payments will be a concern for you as a beneficiary or prospective recipient of checks because it will impact your take-home pay.
Your ability to set reasonable expectations for what the upcoming years will bring will improve with increased knowledge of it. Continue reading to discover the core of this issue.
Why do your Social Security checks need to increase?
If you would rather have a more concrete answer, think about inflation.
That was the main justification for the 1975 push for a standardized method of increasing Social Security benefits so that they could closely follow, or at least keep pace with, the long-term trends in inflation.
Prior until this, adjustments had been made, but they were focused on specific legislative initiatives rather than a methodical and well-defined approach to managing the cost-of-living adjustment.
To get a better understanding of this, think about the complex web of interactions that has developed over time between what the public wants and what companies or the government can provide.
Numerous things impact this, such as the state of the weather, political stability, the availability of resources, changes in regulations, etc.
All publicly available goods and services will have higher pricing as a result of these several sources of change. But incomes, unless you switch occupations frequently, do not move as quickly as the economy.
They are falling behind, and you will face what is called a decrease in purchasing power because the items you used to purchase are now more expensive.
This means you will have to determine two things: first, if it is worth having and whether you can afford it, and second, how much you can obtain. If the first response is “yes,” the second will typically be “much less.”
How is the process in which your Social Security checks increase?
The prior problem is called inflation, and it impacts both Social Security benefits and worker earnings.
The Social Security Administration (SSA), which oversees the many social security programs, has developed a tool called the Cost of Living Adjustment, or COLA, to solve this.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is a measure of price changes and how they impact Americans’ spending preferences.
The cost of living adjustment is computed by taking the average of the third quarter’s CPI-W value and comparing it to the calculation from the prior year.
What can you expect for next yearās Social Security checks to increase?
Your Social Security check increase will not be the same as it was in previous years, and that is the most crucial item to keep in mind. This is an inevitable result of the stabilization of the world economy.
The impact of the COVID-19 pandemic was so great that we witnessed an unprecedented surge in COLA. When you consider the increments from previous years, this becomes clear.
| Year | COLA adjustment |
| 2020 | 1.3% |
| 2021 | 5.9% |
| 2022 | 8.7% |
| 2023 | 3.2% |
The inflation numbers for this year show a good result with a downward trend.
Because of this, groups like the Senior Citizens League (TSCL) have predicted a COLA of 2.5%, which is a little less than the average of 2.6% over the last 20 years, even though we are still waiting for the next CPI-W number in September.
The average senior’s pay will go up by $48 because of this. Understanding how much your buying power decreases may not seem important at first, but it gives you confidence that the next year will be easier than the last ones, which is a big plus.
