Social Security COLA Estimate Set at 8.6% for 2023 as Inflation Rises in May

The Social Security Administration uses average inflation in the third quarter, based on the CPI-W, to calculate the benefit adjustment for the following year. The COLA was 5.9% in 2022.

The biggest price increases in May were in shelter, gasoline and food, according to the Bureau of Labor Statistics. After declining in April, the energy index rose 3.9% in May, with gasoline rising 4.1%. The food index rose 1.2%.

The index less food and energy rose 0.6% in in May, the same as the previous month. For the past 12 months, inflation on items less food and energy slowed slightly to 6.0%, versus 6.2% in May.

The BLS stated that over the past 12 months the energy index rose 34.6%, the largest increase since the period ending in September 2005. Gasoline rose 48.7% over that period. The food index increased 10.1% over the same period, the largest increase since the period ending in March 1981.

 Solvency Debate

With various bills in Congress looking at how to prevent the Social Security Old-Age and Survivors Insurance Trust Fund from going bust in 2034, Goss made these observations last week:

People are waiting longer to claim Social Security. He noted that when people leave a job, they typically are finding “different work instead, better paying.”
One possible funding solution is “scrapping the cap,” or placing a payroll tax on all those with income above $400,000 per year. Another is having a tax such as the 3.8% investment tax to help fund it.
Another idea is to increase immigration. As Goss said, undocumented immigrants are not eligible for Social Security, but their children born in the United States are and grow into taxpaying citizens. Also, many immigrants who come over legally (or even undocumented) can become taxpaying citizens.

“Immigration is truly a positive [to Social Security],“ Goss said. “There’s been a dearth of immigration lately, but as the pandemic wanes, there will be more.”