Updated inflation numbers suggest largest COLA since 1981 saw 11.2% – and 2023’s Cost-of-Living Adjustment (COLA) could get even higher.
Just a few weeks ago, our COLA update indicated that next year’s adjustment was estimated to be between 7.3% and 10.8%. The most recent inflation percentages indicate that the 2023 COLA will, most likely, be on the higher end of that range. According to the Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers, which the social security and federal retirement COLAs are based on, is now projecting that the upcoming COLA will be between 10.5% and 11.4%. These latest estimates were provided by the non-partisan “Senior Citizens League.”
Highest COLA Since 1980?
In 1981, the COLA for Social Security and federal retirees was 11.2%. The year before that, the adjustment was 14.3% – the highest ever. While it doesn’t appear at the moment that the record will be broken, if the COLA ends up at 11.3% or 11.4%, the 2023 COLA will be in second place. Rounding out the current top 5 highest COLAs: 7.4% in 1982, 5.9% for 2022, and 5.4% in 1990. For FERS annuitants, which didn’t yet exist in the early 1980s, they receive the CPI percentage minus 1% when inflation is 3% or higher. So, the FERS COLA is currently projected to be between 9.5% and 10.4%.
Remember Medicare B Premiums
For many Social Security recipients, any COLAs are offset by the rising cost of Medicare B premiums, which are taken directly from Social Security payments. The largest increase in cost occurred in 2022, when Medicare B premiums shot up 14.5%. The 2022 COLA of 5.9% hardly made up for this. So, while a record-breaking COLA would certainly be welcomed by retirees receiving Social Security and/or a federal pension, the rising cost of Medicare B can have a negative impact. This is why FEHB plans that reimburse Medicare B payments can be so beneficial.
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Until Next Time,
**Written by Benjamin Derge, Financial Planner, ChFEBC℠. The information has been obtained from sources considered reliable but we do not guarantee that the foregoing material is accurate or complete. Any opinions are those of Benjamin Derge and not necessarily those of RJFS or Raymond James. Links are being provided for information purposes only. Expressions of opinion are as of this date and are subject to change without notice. Raymond James is not affiliated with and does not endorse, authorize, or sponsor any of the listed websites or their respective sponsors.