DETROIT (WXYZ) — The Social Security Administration is expected to announce the biggest year over year increase to benefits.
Announced every year, the cost of living adjustment (COLA) is based on the consumer product index (CPI) or the average change over time in the price of goods.
According to the latest CPI data, COLA could increase by 8.7% which is the highest increase since the 1980s.
"This has been happening since 1975 and it means that social security is indexed to inflation," said Yulya Truskinovsky who is an assistant economics professor at Wayne State University. "They compare the same bundle of goods in the third quarter of one year to the third quarter of the previous year."
The COLA increase is designed to prevent recipients from losing buying power as inflation drives up the average cost of living. The benefits are paid out to senior citizens, people with disabilities and sometimes children.
"I think for many (social security beneficiaries) it should be substantial. So the average social security benefit is somewhere around $1,700 a month so you’re looking at a substantive increase," said Truskinovsky.
Seniors in Detroit say living on a fixed income has been tough with record high inflation.
"You have different things that are necessities; food, clothing, housing and stuff like that all has to go into play with that and then it becomes juggling the number," said John Moore senior.
It's the reason they say they hope to see a significant increase in their monthly payments soon.
Lucille Towns says the last few years have put a squeeze on her already tight budget. She says as a result she has been spending more time at the Saint Patrick's Senior Center in Midtown.
"It’s been a real challenge," said Towns. "I’ve had to do my shopping here as opposed to going to Kroger or the other stores like Walmart."
Towns says she uses the senior center to save money on meals and to get access to free produce. She says while she's excited about the potential increase in COLA benefits, she's concerned it will result in a rise in costs in other places.
"I’m looking forward to that. I think that’s a blessing provided that the cost for my Medicare premium doesn’t increase considerably as well," said Towns.
Towns is not alone. Advocates at the Saint Patrick's Senior Center echoed her concerns. They also voiced concerns about a rise in rent payments which are often based on the income of the tenant.
Truskinovsky says this years COLA increase will not likely come with higher medical insurance rates like it has in years past. However, she says once social security benefits get above a certain threshold, beneficiaries will have to pay income taxes on the money.
Senior advocates say they're also concerned that the rate at which COLA will increase payments next year will be outdated by the time beneficiaries receive the funds.
"While we recognize it’s probably one of the largest increases in social security COLA in the last 40 years, we’re not sure that it truly captures the full impact of inflation," said Ronald Taylor who is the president and CEO of the Detroit Area Agency on Aging. "The reason I say that is because COLA is based upon the CPI and that was captured through august of 2022 and inflation has continued to increase since then."
The DAAA advocates on behalf of more than 154,000 senior citizens in nine metro areas including Detroit, Hamtramck, Highland Park and Harper Woods. Taylor says DAAA has seen increased need over the last few years and even with the COLA increase, help will likely still be needed.
"I think community-based organizations are going to continue to play a vital role in filling that gap or that need and I also think that our policy makers need to continue to look at ways in which there can be some enhancements to social security," said Taylor.
The Social Security Administration is set to make an official announcement regarding COLA on Thursday. The increased benefits will begin on January 1, 2023.
