Yahoo Finance's Kerry Hannon discusses the outlook for Social Security cost of living adjustments due to inflation and how that could affect retirees.
AKIKO FUJITA: Record inflation is continuing to rattle consumers. And it may even impact Social Security cost of living adjustments. Yahoo Finance's Kerry Hannon joining us with the details. Kerry, you've got a big story out on this specifically. What kind of adjustments are we talking about?
KERRY HANNON: Yeah, it's pretty crazy. The experts I talked to this week say we could be seeing double digit cost of living adjustments up. So ballooning your check that you're going to get. Now these are just scenarios right now, but it's significant to think about because millions of retirees depend on Social Security as a major piece of their income. And this year, it went up 5.9%. They're talking it could be touching over 11% increase for next year.
Keep in mind, though, that this number is not going to be nailed down until October, because what the Social Security, that amount is figured by the inflation rates in July, August, and September, the average. So we won't know until October, what's going to happen in January. But they're very, very likely, based on what we've seen with the hot inflation so far this year, that retirees are going to see a big bump in their checks next year.
AKIKO FUJITA: So these benefit checks could also affect the main Social Security trust as well. I mean, what specifically should people be doing? How should they be approaching this?
KERRY HANNON: Yeah, that's an excellent question because, yeah, well, it's kind of a good news, bad news situation, right? So we're looking at the great news is, retirees are seeing inflation eroding their buying power today. So we're not going to see this bump up until next year. But the fact is the implications are that some retirees could get bumped out of the income limit so they may be taxed on-- they may come into a tax situation with their Social Security benefits. And some people in the lower incomes could actually lose some benefits if the check goes up.
Those are two implications. The third big one that you just alluded to is that the Social Security fund could deplete sooner than the 2034 they're currently saying a dozen years from now. Because of these bigger checks, could that take a bigger hit? What we're hoping, economists say, well, if companies weigh in the inflation rate into some of the wage bumps, the raises they give out to their employees this year, then there'll be bigger checks bigger payments going into the system, which will balance out these bigger checks.
But keep in mind. I don't think any company that I've looked at is saying they're going to give 9% raises or 10% raises. So you can imagine that there's going to be a discrepancy here. And keep in mind, I should note that this year, the Social Security trustees had expected that they would bump up checks 3.4%. So this is a far cry from that when we're talking 11.1% double digit jumps.
BRIAN CHEUNG: Yeah, certainly a difference between nominal and real wages. Yahoo Finance's Kerry Hannon, thanks so much.