Social Security benefits could see largest cost of living increase since 1981

Yahoo Finance's Kerry Hannon joins the Live show to outline how cost of living adjustments are forecasted to catch up with Social Security benefits.

Video Transcript

RACHELLE AKUFFO: All right. Now, shifting gears here, retirees might be getting a big bump in their Social Security payments. Based on July's inflation data, the cost of living adjustments for Social Security benefits could potentially increase 9.6% next year. Now, this would boost the average retiree benefit by $159 a month, according to estimates from the Senior Citizens League.

Yahoo Finance's Kerry Hannon joins us with more on these latest figures. So Kerry, good to see you. What are your takeaways here?

KERRY HANNON: Great to see you, Rachelle. This is really big news. I mean, this would be-- now, we still have some time to go here. But this is really welcome news for retirees and people on a fixed income who have really had a hard time keeping pace with inflation.

I mean, this could be the biggest increase in 40 years, when we had about-- in 1981, there was something like 11.2% bump up, but this is huge. This year, we had roughly 5-- we had 5.9%, but that didn't it really didn't keep pace with the inflation that fixed income people had to wrestle with. So this would be welcome.

Now, here's what happens. They come up with this number based on July, August, and September. So we're actually not going to see the real number until October.

I think the date is October 13th or 14th. I think it's the 13th that we'll officially know what a cost of living increase will be for next year. It is adjusts annually. So this would be a great relief for the folks on the fixed incomes, and I do think the economists I talked to all said they're thinking 9% to 10%.

- Well, yeah. That shift could be very significant. I to ask about the impact specifically on the Social Security Trust Fund, because that increase, I imagine, would have an impact on that as well.

KERRY HANNON: Yeah. That's a big factor, no question about it. Because we hear about this all the time, and this is the issue. This is very expensive.

This will be a big expense, and the experts and the economists I spoke to yesterday said, you know what, this could really hasten the date, even by as much as a whole year. They're thinking 2034, perhaps. I mean, this is one of those numbers that's a little hard to pin down, but it is certainly going to take a hit on the fund to fund this.

- Kerry Hannon, thank you so much.


- Oh, sorry. Go ahead, Rachelle.

- I was just going to ask, obviously, this is the largest increase that we've seen since 1981. Just how did it get to this point, and how do things like inflation factor into this?

KERRY HANNON: It really is. It's they take that number, it's sort of as inflation bumps up, but they sort of make up this-- the number they come up with, they take those three months, July, August, September. They average it out, and they say, OK, how's this look? And then the checks start coming in in January.

So there is this lag time before the retirees and those taking Social Security will actually receive this benefit. Some years, maybe, say, for example, inflation goes way down in the next couple of months or after they make the announcement in October. They could come out overcompensated, but I don't think that's likely to happen.

- All right. Kerry Hannon, thank you so much. Appreciate it.