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Social Security: Cost-of-living adjustment to hit 8.7% in 2023

Yahoo Finance’s Kerry Hannon joins the Live show to break down the 2023 COLA increase.

Video Transcript

RACHELLE AKUFFO: All right, well, Social Security's cost of living adjustment for 2023 will increase 8.7%. That's the largest gain since 1981. Yahoo Finance's Kerry Hannon joins us with the details. Kerry, what do we need to know?

KERRY HANNON: Well, I'm telling you, this is a big bump up. It's really going to allow Social Security recipients to tread water a bit better, right? I mean, we've seen this big bump up in inflation this year. This will make a big difference in their checks starting in January. Again, this will be, for the average check, maybe $140. And each monthly check will be a bump up for an average one.

And so it's really important to focus on this as something that a lot of people think of retirees living on a fixed income. Well, guess what? Social Security is not fixed. It is adjusted for inflation. So even though it's a little backwards-looking, moving forward into 2023, there will be seen some breathing room, let's say. They're going to get some breathing room.

And Rachelle, you partnered this with the Medicare, the dip in the premiums for the plan B premiums coming up in 2023. And that's a nice little boost for retirees looking at what has been a tough year this year in paying for groceries and rent and gasoline and all those other things. So this is welcome news.

SEANA SMITH: And Kerry, speaking of high inflation, I bonds, I want to bring this up because the rates on I bonds, even though they have been very strong here, they're expected to drop. What can you tell us about that?

KERRY HANNON: Yeah, yeah, good one because they are tied to this whole issue that the equation gets us. Now, we're not going to know officially until November 1 because they get adjusted twice a year-- May 1, November 1. This what-- the analysts I talked to today said, right now, through the end of October, these I bonds are paying 9.62%.

But what we're looking at moving forward for that November 1 number, based on the CPI numbers, which goes into that equation, is around 6.4%. It could be 6.5%. But what happens is-- and the Treasury is suggesting, if you go to Treasury Direct right now, they're saying try to get-- lock in by the 28th of October so that you have your bond in hand by the 31st.

But here's the good news. You'll get paid for the first six months that you hold that bond, that old rate, that 9.62%. And then after that, the next six months, say it is the 6.4% that we're looking at. You get the combination of the two, which, I'm telling you, it's pretty attractive. It could be, like, say, 8% for the year. So this is something-- as I often say, this is not a sexy investment, but it is a safe investment.

SEANA SMITH: Certainly, an investment that has really gained in popularity here over the last several months. I'm sure we will continue to talk about it. Kerry Hannon, thanks so much for joining.