Social Security received a COLA of 8.7% in 2023. Will seniors ever see such a big boost again?

In 2023, seniors on Social Security saw their benefits increase by 8.7%, when one of the most generous cost-of-living adjustments, or COLAs, occurred amid rising inflation. However, this year’s COLA was much more modest at just 3.2%.

Meanwhile, Social Security COLA estimates for next year are coming in even lower so far. Recently, the nonpartisan Senior Citizens League projected that COLA would reach 2.66% by 2025.

A person in the produce aisle of a supermarket.A person in the produce aisle of a supermarket.

A person in the produce aisle of a supermarket.

Image source: Getty Images.

Of course, we won’t know what next year’s COLA will be until October. That’s because COLAs are based on third-quarter consumer price index data for urban wage earners and white-collar workers.

Since the third quarter of the year hasn’t even arrived yet, it’s clearly a bit premature to make assumptions about a 2025 COLA. Therefore, that 2.66% projection is really just a guess, albeit an educated guess based on of the current inflation date.

If you’ve been receiving Social Security benefits for a while and enjoyed seeing your benefits increase by 8.7% early last year, you may be wondering if such a big increase will ever happen again. The answer is: you can, but you don’t necessarily want that.

Another 8.7% Coke is possible

Because COLAs are tied to inflation, it is more than feasible that inflation will start to rise at some point, leading to a massive increase in Social Security benefits. We could even see a COLA well above 8.7% in the future, depending on economic conditions.

In fact, 8.7% is not the largest COLA Social Security cut ever. In the early 1980s, when inflation was truly out of control, Social Security beneficiaries received three consecutive COLAs of 9.9%, 14.3%, and 11.2%, respectively.

But in the context of more recent years, that 8.7% cola certainly stands out. In 2022, Social Security recipients saw their payments increase by 5.9%. But the year before โ€“ 2021 โ€“ they only got a 1.3% pay increase. And between 2010 and 2019, there were three years in which Social Security benefits received no COLA at all.

You don’t really want a huge Coke

If you’re a salaried employee, a big raise is something you definitely want. But if you’re a Social Security recipient, believe it or not, you don’t have to hope for a giant COLA year after year.

Large COLAs are simply the result of rising inflation. So while your monthly Social Security checks may increase, chances are you’ll also pay a lot more at the grocery store, at the pump, and just about everywhere else.

To put it another way, large Social Security COLAs simply offset faster-than-typical inflation. They generally do not help seniors gain purchasing power.

That’s why it’s very important to retire from more than just Social Security. If you have savings to take advantage of on top of your monthly benefits, you may not have to worry as much if grocery and utility prices rise.

All told, it’s more than possible to see another 8.7% Social Security COLA, or an even larger one. But it’s not really something you should hope for either.

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