Over the past few months, there has been much discussion on the estimated Cost-of-Living Allowance (COLA) for 2023. We’ve had various estimates ourselves, but without the final CPI-W numbers, it was largely speculation, especially early in the year.
The final COLA, effective Jan 1, 2023, will be 8.7%. This figure applies to Social Security recipients, Veterans Administration (VA) benefit recipients, and federal retirees. You’ll want to do some research on your specific benefit program, as some of these handle the 8.7% increase in a slightly different manner.
One group of people this COLA does not apply to is federal employees. Instead, the President has issued an alternative pay letter that outlines his plan to issue an average 4.6% pay raise to the entire federal workforce. The details of this will be finalized in an executive order sometime in December.
Things you can do today
While I’m sure you’re excited about the prospects of an 8.7% raise, I don’t want you to get too excited. Let’s not forget, the reason the COLA is 8.7% is because of rampant inflation that has plagued the U.S., and most of the world for the past two years.
Before spending your future pay raise, maybe it’s time to think about ways to shave some money off of your monthly budget in preparation for more inflation. Just be cautious… because no one is exactly sure what to expect in 2023.