Next Year Will See a Record Increase in Social Security. It's Not Enough, Experts Say

This year's COLA failed to keep up with inflation. Analysts predict a shortfall in 2023, as well.

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Expertise Personal finance | Government and Policy | Consumer affairs
Dan Avery
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The 2023 cost-of-living adjustment for Social Security is 8.7%. That's the biggest bump to benefits since 1981, when the COLA hit an all-time high of 11.2%.
But some say it's still not enough to deal with ongoing inflation: 55% of retirees believe the 2023 COLA should have been higher, according to a poll from The Motley Fool

They're not alone. Advocates for seniors argue that the Consumer Price Index for Urban Wage Earners and Clerical Workers --  the metric used to calculate the annual adjustment -- isn't an accurate bellwether for their economic needs.
Here's what to know about the increase to Social Security benefits in 2023.
For more on Social Security, find out if your benefits are taxable and learn when you can expect your monthly check.

Is the 2023 COLA high enough?

This year's COLA was 5.9%, itself a 40-year record broken only this year. But the annual inflation rate was 7.7% for the 12 months that ended in October 2022. In June, it peaked at 9.1%. 

Through August, the 2022 COLA fell short by 48%, according to the nonprofit Senior Citizens League, meaning the average beneficiary was shortchanged $417 for the year to date.

"We anticipate an ongoing shortfall in 2023," Senior Citizens League policy analyst Mary Johnson told CNET. "The rate of inflation has fallen significantly from where it was a year ago, but we're still in a high-inflation period."

The National Council on Aging called next year's increase "insufficient."

"Our nation's support programs are not meeting today's realities," the organization said in a statement after the 2023 COLA was announced.

How much do retirees depend on Social Security? 

There's serious debate about how heavily older Americans rely on their benefits. A 2017 report released by the Social Security Administration said less than one in five (19.6%) of those 65 and older relied on Social Security for at least 90% of their income.

In 2020, though, the National Institute for Retirement Security put that figure at close to 40% of seniors.
In October 2022, AARPChief Executive Officer Jo Ann Jenkins said Social Security "provides nearly all income" for 25% of retirees. But a Senior Citizen League survey from this fall found it was more like 54%, according to data Johnson provided to CNET.

"It all depends on how you calculate the figures," Johnson said. "And obviously there are reasons to make that number appear smaller."

Does Social Security need to change how it calculates the Cost of Living Adjustment?

One common complaint is about how the COLA is tabulated. Currently, it's determined by year-over-year changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W

A bill sponsored by Rep. John Larson, a Democrat from Connecticut, would instead tether the COLA to the Consumer Price Index for the Elderly, or CPI-E, which puts greater emphasis on the price of health care, housing and other goods and services that have a greater impact on older Americans.

"The truth is, the COLA has not kept up with inflation for years because the current formula does not accurately reflect seniors' expenses," Larson said in a statement in September.

Johnson agrees the CPI-W isn't an entirely accurate assessment. 

"It only surveys working adults under the age of 62, while Social Security is aimed at retirees over 65," she said. "There are obviously differences in how these two groups spend money."

The CPI-W, for example, skews heavily toward gas prices, which impact seniors less. Because of this discrepancy, Social Security benefits have lost 40% of their buying power since 2000, Johnson said.

But the CPI-E Larson is promoting isn't perfect either, Johnson said.
"Right now it's not a fully funded index, like the CPI-W," she said. "It's more of a research tool used to study spending patterns."
Johnson said the Senior League favors funding an elder index that's as in-depth as the CPI-W, and she says there's wide support in Congress, too.  

For more on Social Security, find out when next year's increase is coming, how benefits are calculated and how to access your benefits online.