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There could be a record high Social Security cost of living adjustment in 2023, but it’s not set in stone: 3 things to watch

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An 8.7% Social Security cost-of-living adjustment could be possible by 2023, based on government inflation data released Tuesday.

The estimate comes from The Senior Citizens League, a non-partisan senior citizen group, which found that an increase would increase the average monthly retirement benefit of $1,656 by $144.10.

Such an annual increase in benefits would be the highest COLA most current Social Security beneficiaries have ever received, according to The Senior Citizens League.

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It would also be the largest cost of living adjustment in four decades, surpassing this year’s 5.9% increase in benefits.

“While it’s not as high as we predicted in June, it will still be the highest in four decades,” said Mary Johnson, social security and health care policy analyst at The Senior Citizens League.

The calculation is based on data from the consumer price index released Tuesday, which shows that inflation has risen 8.3% over the past year from August, amid volatile energy and food costs.

The Social Security Administration calculates the annual COLA based on a subset of the data, the Consumer Price Index for Urban Wage Earners and Employees, or CPI-W. That is up 8.7% in the past 12 months from August.

COLA for 2023 is still an estimate

1. September inflation data

The Social Security COLA is calculated by comparing the CPI-W data from the third quarter of the current year with the same three months of the previous year.

So there is still a month of data to go before the official calculation is made.

How inflation progresses during that time affects the official COLA.

2. Interest Rate Increases

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The Federal Reserve’s rate hikes could impact September’s inflation data.

In July, the central bank implemented a second consecutive rate hike of 0.75 percentage point. An interest rate hike of 0.75 percentage point could take place later this month.

“That could affect a lot of consumer confidence that would affect September,” Johnson said.

3. Medicare Part B Premiums

To be sure, how much extra money Social Security beneficiaries see in their monthly checks next year also depends on how much Medicare Part B premiums rise.

Those premiums are often deducted directly from social security checks.

This year, the standard Part B monthly premium is $170.10. The Medicare trustees predict in their annual report released in June that the rate would remain the same in 2023.

The official Medicare Part B premium for the following year is usually announced in November.

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