Senior citizens on Social Security got their biggest raise in four decades this twelvemonth. Retirees received a five.9% increase in their Social Security check in 2022, resulting in larger monthly payments for millions.

While this seems hefty in comparison to recent years -- in 2021, retirees got just a 1.3% bump -- older Americans could be in line for an even bigger increase next year. Just this may actually be very bad news and isn't something that elderly people living on a fixed income should hope for.

Adult looking at financial paperwork.

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Seniors may go a huge Social Security heave next year

The Senior Citizens League has provided some details on the benefits increment the arrangement believes retirees could see next year. This powerful advocacy grouping for older Americans reported that early data from the Bureau of Labor Statistics indicates Social Security recipients could be in line for a vi.2% heighten in 2023.

"The estimate is significant considering the COLA is based on the average of the July, August and September CPI data," Mary Johnson, a Social Security policy analyst for The Senior Citizens League, said in a press release.  "With one third of the data needed to calculate the COLA already in, it increasingly appears that the COLA for 2022 volition be the highest paid since 1983 when information technology was 7.4%."

The Senior Citizens League made this estimation based on the fact that Social Security's periodic Cost of Living Adjustment is determined based on changes to prices as measured by a specific BLS index.

COLAs are intended to help ensure Social Security benefits continue stride with inflation, rather than remaining stagnant and leaving seniors with less buying power as the cost of goods and services increases. BLS data for one of the 3 central months used to calculate Social Security increases shows that inflation is well-nigh tape highs, and thus the COLA is likely to need to be a substantial upward aligning to ensure retirees don't lose ground.

Why is a big heighten bad news for seniors?

Getting 6.2% more coin each month may sound good, only there are actually two reasons why these projections of a big benefit increase are really bad news for older Americans.

Start and foremost, the fact that aggrandizement is surging means that retirees likely received too pocket-size a raise in 2022. Since prices have already gone up in excess of the 5.9% benefits increment seniors started receiving in January of this year, retirees have already fallen behind. The checks they'll get all yr won't buy as much as earlier the toll of goods and services started going upwardly speedily -- even though each payment is higher than it was in 2021.

Second, the Senior Citizens League'south estimate suggests the system clearly believes aggrandizement will continue to be a problem going forward -- otherwise, they'd be projecting a smaller benefits increase. And aggrandizement hits retirees really hard, because not simply does information technology affect how far Social Security goes, but it also means their retirement savings won't exist worth equally much in real terms.

Since retirees tend to invest conservatively, information technology's less likely the returns they earn volition be enough to preserve the value of their savings relative to rising prices. Retirees besides must maintain a prophylactic withdrawal charge per unit to ensure their money doesn't run dry. So with the income they take from investment accounts not going as far, they'll need to either make budget cuts or have more coin out and hazard their future security.

Seniors should picket the BLS information carefully over the side by side several months. If information technology continues to show prices rising rapidly, it will be important to offset looking for spending cuts to make ASAP to preserve their avails -- despite the fact that they'll be on rails for a bigger raise in 2023.