Runaway inflation has shaken the U.S. economy this year, and consumers have felt the impact at every turn. The S&P 500 had its worst first half since 1970, and the soaring prices of gas, groceries, and utilities have forced more than one-third of Americans to dip into their savings. But high inflation has been particularly hard on seniors that depend heavily on Social Security.

This year, the Social Security Administration (SSA) enacted a 5.9% cost-of-living adjustment (COLA) to help protect the buying power of benefits. Unfortunately, inflation hit a 40-year high of 9.1% in June, meaning the COLA in 2022 failed to completely offset the impact of rising prices.

To that end, many experts are expecting a massive COLA next year. In fact, earlier this year the Committee for a Responsible Federal Budget estimated that benefits could soar 11.4% in 2023, marking the largest COLA since 1980. Unfortunately, seniors probably won't see a raise of that magnitude.

Here's why.

Inflation is starting to cool down

COLAs are based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a metric that tracks how much more (or less) wage earners must pay for the same basket of goods and services over time. Specifically, the third quarter CPI-W (i.e. July through September) from the current year is divided by the third quarter CPI-W from the previous year, and the increase becomes the COLA for the next year.

Building on that, the CPI-W jumped 9.8% year over year in June, prompting a wave of potentially overambitious COLA forecasts. But year-over-year inflation actually started to cool in July, and that trend continued in August, according to the U.S. Labor Department. Specifically, annual growth in the CPI-W slowed to 9.1% in July, and it slowed again to 8.7% in August.

So how big will the COLA be? The official adjustment cannot be calculated until September inflation data is available. Seniors should expect the SSA to publish the official COLA in mid-October. That said, it is possible to make a slightly more informed guess now that August inflation data is available. So here are two scenarios worth considering.

If annual gains in the CPI-W measure of inflation remain at 8.7% in September, the COLA would clock in at 8.8% next year. In that scenario, the average retired worker would receive an extra $147 per month in Social Security retirement benefits.

If annual CPI-W growth falls to 8.3% in September, the COLA would come in at 8.7% next year. In that scenario, the average retired worker would receive an extra $143 per month in retirement benefits.

Seniors are still on pace for a huge COLA

While seniors may have been hoping for more, even an 8.7% increase in benefits would still represent the largest COLA in the last four decades. That said, seniors must remember that COLAs are designed to offset the impact of inflation and protect the buying power of Social Security benefits. That means any extra cash derived from a massive COLA in 2023 will likely be eaten away by rising prices.

In fact, seniors may actually feel like they have less money next year. Some experts believe COLAs have failed to keep pace with inflation over the long run, and The Senior Citizens League estimates that Social Security benefits have lost 40% of their buying power since 2000. With that in mind, seniors must continue to budget their money wisely.