Social Security COLA increase for 2023

What happened: The Social Security Administration (SSA) is set to announce the 2023 Cost-of-Living Adjustment (COLA) on October 14, following the release of third-quarter inflation data. This announcement could be significant, as high inflation driven partly by the Iran war's impact on energy prices may lead to the largest COLA increase in years. The average Social Security benefit for a 65-year-old retired worker is $1,504.98 per month, and a 3.2% COLA is projected.

Market impact: Higher COLAs could boost the income of approximately 70 million Social Security beneficiaries, driving increased consumer spending and potentially stimulating economic growth. This could benefit sectors like retail and consumer discretionary. Conversely, higher COLAs may also lead to increased government spending, potentially putting pressure on the federal budget.

What to watch next: On October 14, the SSA's COLA announcement will reveal the exact increase for 2023. Additionally, the September inflation report from the Bureau of Labor Statistics, due on October 11, will provide further clarity on the potential size of the COLA. These data points will shape the narrative around Social Security benefits and their impact on the broader economy.