The Social Security Administration (SSA) announced an 8.7 percent cost-of-living adjustment (COLA) for 2023, the largest inflation-fueled increase in benefits in more than 40 years.
Starting in January, the average monthly Social Security retirement benefit will rise by about $146, from approximately $1,681 to $1,827, according to the SSA.
The increase “will provide much needed relief to millions of Americans,” AARP Chief Executive Officer Jo Ann Jenkins said, noting that Social Security “is the largest source of retirement income for most Americans and provides nearly all income for 1 in 4 seniors.”
“The guaranteed benefits provided by Social Security, including the annual COLA, are more crucial than ever as high inflation remains a problem for older Americans,” Jenkins added. “The automatic adjustment is an essential part of Social Security that helps ensure the benefit does not erode over time due to rising prices.”
How the COLA was calculated
Social Security benefits have been adjusted annually for inflation since 1975, using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a market basket of goods and services tracked by the U.S. Department of Labor.
The SSA bases the COLA on the percentage change in the CPI-W for the third quarter from one year to the next. The 2023 adjustment represents the difference between the average CPI-W index from July, August and September of 2021 and the average for those months in 2022.