Will seniors be in line for their largest Social Security raise in decades next year? That's looking likely.

In June, the Consumer Price Index (CPI) rose 9.1% on an annual basis, marking the index's largest increase in roughly 40 years. Now Social Security cost-of-living adjustments, or COLAs, are actually based on third quarter inflation data from the CPI-W, which is the Consumer Price Index for Urban Wage Earners and Clerical Workers. And that's not data we're privy to yet (what with it being July and all).

But still, it's fair to assume that Social Security benefits will increase substantially in 2023. And some estimates are calling for a 10.5% boost, which would far surpass the 5.9% COLA seniors received in early 2022.

Social Security cards.

Image source: Getty Images.

But while some Social Security recipients may be eagerly anticipating a large COLA next year, the reality is that a giant raise really isn't a good thing. The reason? It's unlikely to actually help seniors get ahead financially.

Why a large COLA isn't a reason to celebrate

When Social Security benefits go up in a very big way, it's only because high levels of inflation allow for that. But that means that in a best-case scenario, a large COLA will allow seniors to maintain their buying power in light of inflation -- not gain more of it.

And remember, that's the best-case scenario. Earlier this year, many seniors on Social Security thought they'd be sitting pretty in the wake of a 5.9% raise. But as we can see, the rate of inflation has sat at well above 5.9% over the past number of months. That means seniors have actually lost buying power this year.

But that's not the only reason seniors shouldn't get too excited about a large Social Security COLA. The other reason is that if Medicare costs increase a lot next year, they'll eat away at that COLA even more.

In 2022, the standard Medicare Part B premium is $170.10. In 2021, it was $148.50. That $21.60 monthly jump took away a chunk of this year's COLA, and there's no reason to assume the same won't happen next year.

As such, while seniors can expect a generous COLA for 2023, they shouldn't expect their standard of living to improve as a result of it. Those looking for more financial breathing room will likely need to take matters into their own hands by cutting expenses or looking at part-time work.

The good news with regard to the latter is that the gig economy has expanded and grown increasingly flexible. And so taking on part-time work could mean finding a remote job or one with a very easily managed schedule.

Take the next COLA announcement with a grain of reality

Social Security COLAs are typically announced during the first half of October. Until then, seniors can only guess at the raise that's headed their way. But they should also be realistic about what that raise might actually do for them.

It's definitely a good thing that Social Security benefits are designed to keep pace with inflation. But it's also important to recognize that they often fail to do so.