AARP Eye Center
Inflation has been raging for more than a year, pushing up prices on everything from steak to gasoline. For retirees worried about paying soaring bills, a big question is whether their Social Security benefits will be able to keep up with inflation.
The short answer: Probably. Social Security’s annual cost-of-living adjustment (COLA) has kept up well with inflation the past 20 years, according to the Center for Retirement Research at Boston College.
Still, concern among older Americans remains widespread. A new AARP survey found that 90 percent of people age 50 and older worry that Social Security benefits won’t keep pace with inflation. And, despite the 5.9 percent COLA that went into effect in January, many beneficiaries have lost buying power to this year’s hotter inflation burst, thanks in part to the large increase in Medicare Part B premiums.
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Next year could be better, however, with an 8.7 percent COLA for 2023, the largest benefit boost in more than four decades, coupled with lower Part B premiums and deductibles.
Annual adjustments
When the first Social Security check was issued in 1940, the payments were fixed: The amount of your benefit didn’t change from year to year unless Congress authorized a raise. In 1973, however, the Organization of Petroleum Exporters (OPEC) declared an oil embargo on the United States and other countries, which sent gas prices through the roof and touched off a spike in inflation.
The Consumer Price Index (CPI), the government’s main gauge of inflation, rose 6.2 percent in 1973 and 11.1 percent in 1974, sharply reducing the buying power of a Social Security payment. In response, Congress authorized automatic COLAs, which adjust Social Security benefits for inflation each year. The first automatic COLA, in 1975, was 8 percent.
