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Social Security pay raise 2023

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Yet again, the inflation numbers have been released they are worse than expected. This has been a continuing trend in the past few months. While this is harming purchasing power for nearly all Americans, it is also causing a secondary effect: an increasing federal budget. That’s right, let’s take a look at the 2023 COLA projection.

Inflation for June

Per the Bureau of Labor Statistics, June inflation came in around 9.1%. This is higher than most people expected, and as a result, will probably force the Federal Reserve to push the interest rate significantly higher. By doing this, the Fed aims to slow American spending on large purchases, most notably homes. The average interest rate for a 30-year fixed rate mortgage with top credit is 5.85% this week. This is compared to around 3.56% in the end of January.

COLA outlook 2023

Each year, the Federal Government pays out a Cost of Living Allowance (COLA) to federal retirees, Social Security recipients, VA benefit participants, railroad retirees, etc. This is also done at the state level, but we’re focusing on the federal portion here.

Many sources are estimating the COLA to be around 10.5%, and even up to 11.1% in some cases. Now keep in mind, the Medicare premiums increased by 14.5% also, which diminishes the effect of the large COLA increase.

Source: www.ssa.gov

As you can see in the chart above, we’ve entered some experienced some expensive years recently. Now, if you don’t receive a COLA since you’re still in the workforce, you might be asking where your 10.5% raise is coming from. That’s a great question. If you don’t receive a substantial raise in 2023, you’ll be losing a ton of purchasing power by keeping the same job. I know it’s not what people want to hear, but it’s the truth.

What to do now

We’ve talked about this a lot recently, but it’s really worth being said again. If you are feeling the pain caused by inflation, there are some things you can do to help out your personal situation. This includes trimming unnecessary expenses, re-quoting your insurance, and some others. You can also read about our recession beating tips here!

What you don’t want to do is sit at home and start spending the hypothetical 10.5% increase. This could be costly for a retiree. Instead, maybe start making a plan for how that 10.5% can help your situation rolling into 2023. After all, proper planning prevents poor performance!

Author

  • D.C. joined the Marine Corps right out of high school. When he left active duty after 5 years of service, he quickly earned a bachelors degree and an MBA. He got his first private sector job at a modest salary and quickly worked his way up through promotions. Once he started making decent money ($38k at the time), he quickly realized he needed to learn how to save for his future. After nearly ten years of research and application, he wants to share his knowledge and financial best practices so more people can become Wealthy Idiots!

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