The Social Security cost-of-living adjustment, or COLA, for 2023 will be 8.7%, the US Social Security Administration announced Thursday, adding approximately $145 a month to the average check for the more than 70 million Americans receiving benefits.
The adjustment reflects the largest increase to Social Security since 1981, when the COLA was 11.2%. It is determined by year-over-year increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers for the third quarter.
In July, the CPI-W dipped from 9.1% to 8.5% and dropped to 8.3% in August. On Thursday, the US Department of Labor Statistics announced the CPI for September dipped again to 8.2%.
The average monthly Social Security check for 2022 has been $1,681, according to AARP, the nonprofit group that advocates for retirees. That reflects a 5.9% COLA, equal to about $93 more a month on average from last year.
The increase for 2023 "will provide much-needed relief to millions of Americans," AARP Chief Executive Officer Jo Ann Jenkins said in a statement.
"The guaranteed benefits provided by Social Security, including the annual COLA, are more crucial than ever as high inflation remains a problem for older Americans," Jenkins added. "The automatic adjustment is an essential part of Social Security that helps ensure the benefit does not erode over time due to rising prices."
The bump goes into effect with December's benefits, which appear in checks going out in January 2023.
One in five retired married couples and 45% of single retirees depend on Social Security benefits for more than 90% of their income, according to data compiled by The Motley Fool.
A June report from the Committee for a Responsible Federal Budget indicated that, without a major intervention, Social Security is only 13 years away from insolvency.
Former Social Security trustee Charles Blahous, a senior research strategist at George Mason University's Mercatus Center, said this year's record increase is a reminder of how essential Social Security is to beneficiaries, "and how much protection against inflation they would lose if it were allowed to become insolvent."