Here’s What Your Social Security Increase Would Be As Things Stand Right Now

If you receive Social Security benefits, you can draw a red circle around Oct. 13, 2022, on your calendar. That's the date when the Social Security Administration (SSA) is likely to announce how big a raise you'll get for next year.

But you don't have to wait until then to have a pretty good sense of what the next cost-of-living adjustment (COLA) will be. Here's what your Social Security increase would be as things stand right now.

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The current snapshot

The SSA calculates annual COLAs by comparing the averages of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter in the current and previous years. Your Social Security increase will match the percentage year-over-year increase (if any).

Keep in mind that the CPI-W differs a little from the Consumer Price Index for All Urban Consumers (CPI-U). The CPI-U receives more attention in the press as the most commonly used inflation metric.

One way to determine what the COLA would be as of today is to only compare the averages of the CPI-W for the first two months of Q3 in 2021 and 2022. Using this approach, your Social Security increase for 2023 would be 8.9%.

Another method is to assume that the CPI-W for September will be the same as it was for August. This calculation would give a slightly lower COLA of 8.7%.

Inflation has moderated a little over the past couple of months. There's reason to expect that the trend will continue. Fuel prices are lower. Housing prices have also begun to decline.

Let's assume that the CPI-W falls in September at the same rate as it did from July to August. If that happens, your next Social Security increase will be close to 8.7%.

But it's possible that inflation could fall at a faster rate in September than in the previous months. For example, the prices of many products sold in August reflected higher transportation costs because they were shipped before fuel prices began to slide. Those prices could decline as lower transportation costs are factored in.

What could the Social Security hike be if inflation absolutely nosedives this month? In theory, the CPI-W could plunge so much that it makes the average for Q3 2022 lower than the average for the same period in 2021. In that event, Social Security recipients wouldn't receive a COLA for 2023.

However, the chances of this scenario happening are very slim. The SSA began calculating annual COLAs in 1975. The sharpest single-month decline in the CPI-W since then was 2.3% in November 2008. If inflation falls in September by the same percentage as this record drop, your Social Security increase would be 7.9%.

A big COLA no matter what

Of course, it's possible that the CPI-W could reverse its current trend and rise in September. This would boost the Social Security increase to a higher level than any of the numbers mentioned previously.

No matter what happens with inflation this month, it's a near certainty that Social Security recipients will enjoy their biggest COLA in four decades. Unfortunately, though, this increase still might not be enough to completely offset the higher cost of living.

Some areas of the U.S. experience worse inflation than others. Also, retirees won't receive their benefits increase until January. In the meantime, they could have to keep paying historically high prices for many products. The upcoming big COLA — regardless of its size — might not have as much pop as you'd like.

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