Hello, this is James Mayer, Branch Manager, from the Huffman Mayer Paolo Wealth Management group of Wells Fargo Advisors. 

Although the annual Cost of Living Adjustment (or “COLA”) isn’t announced until October, we now have a little better idea of how much recipients can expect, and it’s a big number. 

If July’s inflation level holds for the next two months, people receiving Social Security will see their benefit rise by 9.6% for 2023, the biggest such increase since 1981 during the last period of high inflation. 

Although the dollar increase will vary from person to person, according to the Wall Street Journal, that COLA means an extra $160 for the average person collecting benefits. COLA increases are backward looking, so what that really means is that people’s expenses have risen by 9.6%, and the raise is intended to offset that. 

Cost of Living Adjustments are necessary because even in more normal environments, prices are almost always rising. For instance, at a 2.5% inflation rate a retired person’s expenses would double every 29 years. That means you could retire at 65 and see your expenses double by age 94, which is not only plausible, but would be disastrous for seniors living on a fixed income. 

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