The Social Security Administration’s Consumer Price Index (CPI)-W measure of inflation is used to calculate the COLA, which is based on changes in the cost of goods purchased by working people over a period of time. This index has decreased slightly over the past year, but the difference over time can add up.
The COLA for 2023 will be higher than the 5.9% increase in 2022. This increase will be applied to benefits beginning in January 2023. In the latest months, the Bureau of Labor Statistics released data showing that the Consumer Price Index for All Urban Consumers (CPI-W) rose by 0.1% in August. The increase over the previous two months totaled 6.3 percent.
While the exact amount of the COLA for 2023 is still unknown, rising prices are fueling expectations of the biggest COLA in four decades. The Social Security Administration is set to announce the COLA in October, and the increase will take effect in January 2023.
The Social Security Administration bases the COLA on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. It bases its calculations on the average inflation rate for the third quarter of a year. However, the third quarter’s CPI-W could be higher or lower than the overall CPI-W, which is released on October 13. Using the CPI-W data for 2023 will allow the SSA to estimate the amount of the COLA.