The increase in Social Security checks in 2023 based on the Cost of Living Adjustment (COLA) does not mean that the purchasing power of retirees increases considerably.
An analysis by The Motley Fool points out the flaws of this formula, since it does not consider certain essential expenses of the elderly, such as health care.
Examples of this are the cost of Medicare Part B premiums that could reduce the amount assigned by Social Security. The money for the coverage comes from Social Security.
Depending the report, in case the measurement establishes a maximum increase of 10% of COLA for the next year, the above means that people will see an increase in benefits for that amount given the fact that overall costs of living are 10% higher without filtering by line items.
The Social Security Administration (SSA ) establishes the COLA by measuring inflation levels during the months of July, August and September.
The agency uses the calculation known as CPI-W or Consumer Price Index for Salaried Workers in Urban Areas and Administrative Workers to determine the amount.
The index measures the average change in the prices of goods and services equivalent to the consumption expenditure of households residing in a given area.
“The purpose of the COLA is to ensure that do not reduce the purchasing power of Social Security and Supplemental Security Income (SSI) benefits due to inflation. The COLA is based on the percentage increase in the Consumer Price Index for Urban Wage and White Collar Workers (CPI-W) from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA,” explains the SSA in a statement on its website.
In October, the SSA will formally announce the amount of the adjustment for the next year. Preliminary estimates suggest that the beneficiaries would receive, on average, an extra $159 dollars per month.
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