High Inflation Means Benefits Increase for Social Security Recipients
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Here's your money briefing for Thursday, August 11th. I'm J.R. Whelan for The Wall Street Journal. July's 8.5% inflation rate means that high prices are still taking a big chunk out of your finances.
How does July’s 8.5% inflation report affect Social Security beneficiaries right now?
But for some Social Security recipients, there could be some relief on the way. High inflation likely means a substantial cost-of-living increase in their benefits starting in January.
And if the readings come in on a similar level for August and September as well, Social Security recipients will be on track to seeing the highest cost of living adjustment in over 40 years.
Coming up, we'll talk with our retirement reporter, Ann Turgason, about what kind of increase retirees should expect and changes that could mean even more good news for retirees on Medicare. That's after the break.
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July's inflation rate coming in at 8.5% could mean a hefty benefits increase for Social Security recipients. But will it be enough to make up for sky-high prices? WSJ retirement reporter Anne Turgason has been running the numbers, and she's here with more. Hey, Anne, thanks very much for being with us on the show. Thanks for having me. So, Anne, can you just break down the basics of this for us? How is the Social Security cost of living adjustment calculated?
So Social Security beneficiaries receive a cost of living adjustment every year, and it's calculated based on third quarter inflation. So what the government does is it looks at the third quarter rate of inflation And it compares it to the rate from the third quarter last year. And whatever the increase is, is what Social Security beneficiaries get. So it's this July, August, and September's inflation compared to last July, August, and September's inflation rate.
Okay. And so what can Social Security recipients expect the increase to be when they get their first checks in January?
Right. So we only have one of those three readings right now. The July data just came out and it showed inflation rising by 9.1% over the past 12 months.
Hold on, hold on. July's inflation came in at 8.5%. Wouldn't that be the number that gets factored into what the increase will be?
Yeah, no, that's the headline number, right? But the Social Security Administration actually uses a different measure of inflation than that. It uses something called the CPI for urban workers. And according to that gauge, inflation was even higher. And that number did not come in at 8.5% in July. That number actually came in at 9.1% in July. It's even higher than And if the readings come in on a similar level to that 9% for August and September as well, Social Security recipients will be on track to seeing the highest cost of living adjustment in over 40 years. And by one estimate, that could come in around 9.5% as the Social Security COLA, which is the cost of living adjustment.
Oh, wow. Well, I bet recipients must be looking forward to that.
Yeah, I'm sure they are, because, you know, this year, Social Security recipients got a 5.9% increase, which seemed really great when it was announced last October.
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