Cost-of-living adjustments were signed into law in 1975, accounting for rising living costs due to inflation, as calculated by the consumer price index, according to the Social Security website. This year has already seen a record rise, with monthly checks seeing a 5.9% rise in January of $93, totaling $1,657, according to CNET. The next COLA will be announced next month, but it very well could send checks over $1,800.
The CPI data for July put the latest increase at 8.5%, already outpacing this year's COLA and well above the Federal Reserve's target of 2%. July marks the 17th consecutive month that the CPI has exceeded the Fed's 2% target.
As COLAs are measured by the CPI, it is all but guaranteed that the next COLA will result in monthly checks that exceed $1,800. The Senior Citizens League estimated that the next COLA will see an increase of 8% to 10.1%, depending on future inflation, according to the Detroit Free Press. If inflation continues at roughly the same rate, there will be an increase of about 9.6%.
The Social Security COLA the Year You Were Born
Each year, Social Security benefits increase by an amount based on the inflation rate over the previous year. That’s known as a cost-of-living adjustment, or COLA, and 2022 saw the biggest one in decades.
The COLA for 2023 is likely to be even bigger — but how does it compare with past increases? We took a look at Social Security data to find out.
Following are the cost-of-living adjustments for every year dating back to 1975, when automatic annual benefit increases began, as well as details for the years prior. Note that each COLA is listed under the year in which Social Security beneficiaries started receiving it.
When this COLA became effective: With benefits payable for December 2021 (which beneficiaries received in January 2022)
What this COLA was based on: Increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) — which is a measure of inflation — over the year ending with the third quarter of 2021
What Is the Average Social Security Benefit at Age 62?
Your retirement benefit amount depends on how much you’ve earned over your lifetime at jobs for which you paid Social Security taxes — and the age at which you claim. You can claim Social Security benefits as early as age 62, but you’ll only receive your full benefit amount if you wait to claim until your full retirement age (FRA).
According to the Social Security Administration (SSA), if you were born between 1943 and 1954, your full retirement age is 66. By claiming at the age of 62, a hypothetical $1000 retirement benefit would be reduced by 25% and you would only receive $750 per month. A $500 monthly spousal benefit would be reduced to $350.
The greater the gap between age 62 and FRA, the higher the percentage of reduction in retirement benefits. For those born in 1960 or later, retirement benefits are reduced by 30%, and spousal benefits are reduced by 35%. This means a $1000 retirement benefit would be reduced to $700 per month.
According to the SSA’s 2021 Annual Statistical Supplement, the monthly benefit amount for retired workers claiming benefits at age 62 earning the average wage was $1,480 per month worker alone. The benefit amount for workers with spouses claiming benefits was $2,170 at age 62.
Although claiming before FRA allows you to collect retirement benefits for a longer period, your benefit amount will be significantly reduced. The SSA says that if you delay your benefits until after FRA, you will be eligible for delayed retirement credits that would increase your monthly use.