In addition to an important October CPI report being released tomorrow, retirees will want to keep an eye on another very important announcement. Tomorrow also marks the release of the cost of living adjustment (COLA) for social security payments next year. Many expect this adjustment to be the biggest increase in decades.
Given the fact that the 2023 COLA will be based on inflation data, as these increases typically are,
reports suggest the increase could be as large as 8.7%. Such an increase would be the largest since 1981 and the largest ever in nominal terms, bringing an average social security payment to more than $1,800 from around $1,660 right now.
Ultimately, tomorrow’s inflation data will determine what this cost of living adjustment ultimately comes in at. Accordingly, for seniors, hoping for higher inflation (at least for now) may be in the cards.
Let’s dive into where the 2023 COLA could come in at tomorrow.
Where Will Social Security Payments Come in for 2023?
The timing of this cost of living adjustment for seniors arguably couldn’t be better. While inflation is a broad negative for the overall economy — and many expect the Federal Reserve to be successful in bringing inflation down via hurting the economy — seniors generally don’t need to worry about the job market. Lower stock prices and housing prices do affect the amount of money seniors have available to use in retirement. However, from a cash flow perspective, this COLA adjustment could offset much of these losses for most average Americans.
Besides the obvious implications that tomorrow’s CPI report will have on the stock market and other risk assets, this COLA adjustment adds another layer of intrigue behind the report. Whether it’s 8.5%, 8.7% or even 8%, retirees stand to benefit from this massive adjustment.
With Republicans appearing eager to cap such entitlement increases, it’s clear that yet another social item will be on the ballot this midterm election season. Thus, there are plenty of undercurrents investors will want to pay attention to in the months to come.
On the date of publication, Chris MacDonald did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
