Due to this year’s meteoric rise in the consumer price index, a measure of inflation in the cost of goods and services, Social Security beneficiaries will receive an 8.7% cost-of-living adjustment for 2023.
Only three times in the past 46 years has the COLA been higher – in 1979 to 1981 with an increase of 9.9%, 14.3%, and 11.2% respectively.
And while an 8.7% adjustment is significant, it’s important to put the figure in context with the top expense categories retirees will be spending their money on next year when the extra cash comes in.
Many seniors live on a fixed income in retirement. Social Security is often a large part of their income.
The numbers noted below are a 12-month national percentage change in the Consumer Price Index as of September 2022.
The largest expense for retirees is housing, which includes mortgage, rent, property tax, insurance, maintenance, and repair costs.
Right now, various state and local laws meant to prevent large rent hikes are now permitting increases of up to 10%.
Even for non-renters, housing costs are a significant expense.
A recent Harvard University Joint Center for Housing Study report claims that 46 percent of homeowners between the ages of 65-79 (and one in every four people aged 80+) are still paying off a mortgage.
The second highest expense category is transportation and includes vehicles, gas, insurance, maintenance and repairs, car rental, leases, payments, and public transportation. New and used vehicle costs are up 9.4% and 7.2% respectively. Gas of all types is up 18.2%.
Healthcare—which includes health insurance, medical services, supplies and drugs—ranks third on the biggest expenses list for retiree households.
While Medicare is touting a decline in Part B costs, the base Part B Medicare premium will decline to $164.90, which is only a $5.20 decline from 2022’s $170.10 monthly premium. Also, the annual Part B deductible will decline to $226 in 2023 from $233 in 2022. This equates to less than $150 annually.
On average the CPI for other medical care services is up 6.5%.
Food purchased to eat at home, as well as dining out, is the fourth largest category. Food at home has increased 13% over the past year, and food away from home has increased 8.5%.
The fifth-largest retiree household expense is utilities. This category includes bills such as gas, electricity, water, phone, and Internet charges. Energy services overall have increased 19.8% in the past year.
The focus on this column is not about politics.
It is about the realities that retired seniors must deal with in the coming year, especially for those 12% to 15% who rely on Social Security for 90%of their income.
Consider this the perfect opportunity to sit down with your parents or other senior loved ones to begin a dialogue about expenses and the ability to cover them in the coming year. While money tends to be a sensitive topic most people avoid discussing, failing to talk about it may leave your senior loved ones at risk.
You can begin by sharing this article with them. It can provide a jumping off point for discussion and give them an opening to discuss their own personal situation – along with their fears and concerns, if they have any.
The conversation may also inform you of their planning and budgeting process, and may highlight ways in which you can help. All of us want to live the way we have been accustomed to living, but with a fixed income and skyrocketing costs, often something must give.
At Senior Concerns, when seniors or family caregivers request it, we offer a pro bono discussion with a certified financial planner. This professional may be helpful in brokering a frank conversation between seniors and their family.
Additionally, our Senior Advocates are available to highlight cost saving programs like energy assistance, home delivered meals and other measures that might help ease expenses.
Just remember, when approaching your senior loved ones about their finances, go gently and make sure they know you are coming from a place of care and concern.