Seniors are a month away from a major Social Security announcement

Seniors are a month away from a major Social Security announcement

(Christy Bieber)

In mid-October, retirees will receive important news from the Social Security Administration. This is news that many people have been waiting for, and it will have a profound impact on the finances of seniors across the country.

Social Security cost of living adjustment to be announced soon

So what’s the big news? This is the amount of Cost of Living Adjustment (COLA) retirees can expect to receive in 2023. It reveals how much seniors’ Social Security checks will increase next year.

COLAs were incorporated into the Social Security benefit program for an important reason: the price of goods and services increases over time. If retirement checks were set at a fixed amount and never increased, retirees would significantly lose their purchasing power over time. Their benefits would have very little value in real terms at the end of their retirement.

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To avoid this, the program was designed so that periodic benefit increases would occur. Most, but not all, years mean older people see their checks get bigger. And they will soon know by how much. The COLA announcement is expected around October 13, although the exact date is yet to be determined.

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Why will the COLA be announced in October?

If you’re wondering why this big announcement is coming in October when COLA goes into effect in January, there’s a simple answer: That’s when the Social Security Administration first finds out about the extent of the increase in benefits.

You see, the formula used to calculate COLAs is to compare the cost of goods and services as measured by a consumer price index. The price index used is the consumer price index for wage earners and urban employees (IPC-W). This index measures the cost of a “basket” of goods and services, including housing, health care and transportation.

The CPI-W figures are compared year over year and the COLA is based on the percentage increase. But the Social Security Administration does not consider index numbers for the full year — just for the third quarter of the year before the increase was announced.

Thus, the CPI-W figures for July, August and September are the relevant figures used to calculate the average price increase. Because the September data will come out in early October, the Social Security Administration will be able to calculate the 2023 benefit increase and announce it around the middle of the month.

Retirees shouldn’t get too excited, though. Remember that while this is often referred to as an “increase”, it’s just to make sure your checks don’t buy less than before. It is not intended to enable you to purchase After than you did in the past – just to pay for the things you’ve always bought that have now become more expensive.

So, watch for the COLA announcement in the coming weeks so you can plan how much extra money will arrive – but also be sure to keep a close eye on your 2023 budget so you don’t overspend during this time of year. high inflation.

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