Every extra dollar counts in today's economy. Prices for nearly everything are higher than they were a year ago. That's especially problematic for retirees on fixed incomes.
The good news is that a large Social Security cost-of-living adjustment (COLA) is on the way. We won't know for sure what the increase will be until mid-October. However, here's how much bigger the average Social Security check will likely be in 2023.
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More money on the way
Social Security COLAs are intended to help protect benefits against erosion by inflation. Since 1975, these adjustments have been made on an annual basis.
COLAs are calculated by comparing the average of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) over the third quarter of the current year with the average from the same period in the prior year. The amount of the increase (if any) determines the amount of the Social Security COLA.
We don't know yet what the CPI-W average for Q3 of 2022 will be. That number won't be reported until Oct. 13 -- less than two weeks away. However, we do know all of the other numbers needed to calculate the COLA for next year.
Based on where things stand right now, it's likely that the Social Security benefits increase will be a little under 9%. Experts are currently predicting the number will probably be 8.7%.
Pick your average
How much bigger will the average Social Security check be after this estimated increase? It depends on which average you use.
The Social Security Administration (SSA) provides a monthly snapshot of the average check amount for Social Security beneficiaries. But there are different types of beneficiaries. Below is a table that shows the average monthly benefit for August 2022 by the type of Social Security beneficiary, along with what the average monthly check would be in 2023 with a COLA of 8.7%.
| Type of Beneficiary | Average Monthly Benefit in August | Projected Monthly Average for 2023 |
|---|---|---|
| Retired workers | $1,672.76 | $1,818.29 |
| Spouses of retired workers | $833.02 | $905.49 |
| Children of retired workers | $785.35 | $853.68 |
| Children of deceased workers | $980.34 | $1,065.63 |
| Widowed mothers and fathers | $1,136.41 | $1,235.28 |
| Nondisabled widow(er)s | $1,564.76 | $1,700.89 |
| Disabled widow(er)s | $819.97 | $891.31 |
| Parents of deceased workers | $1,404.52 | $1,526.71 |
| Disabled workers | $1,362.34 | $1,480.86 |
| Spouses of disabled workers | $377.35 | $410.18 |
| Children of disabled workers | $429.45 | $466.81 |
Data source: Social Security Administration. Calculations by author.
If you're interested in the average Social Security monthly benefit across all beneficiary types, it was $1,546.49 in August. Assuming a COLA of 8.7%, that total will increase to $1,681.03 next year.
Too little, too late?
Again, we won't know the actual Social Security increase until later this month. However, there's an argument to be made that whatever the COLA is, it will be too little and too late.
The single biggest problem with Social Security COLAs is that they come after recipients have already begun to incur higher prices for goods and services. An 8.7% increase (or whatever it will be) won't help you pay for fuel and food you've already purchased.
Also, COLAs don't protect Social Security benefits from the negative impact of inflation as much as some might think. That's because the CPI-W isn't designed to measure the price increases specifically for older Americans. Retirement benefits make up more than 81% of total Social Security benefits.
Still, the next Social Security increase will almost certainly be the biggest in more than four decades. Those extra dollars will help millions of Americans.
