seniors stressed out about high prices for food fuel and healthcare will notice they have more purchasing power in january when social security checks go up 87 but if the us slips into a recession within the next year as most economists predict inflation could ease and that permanent increase in benefits could feel even larger at least for a while the social security administration announced the biggest costofliving adjustment cola in 40 years on oct 13 boosting the average retiree benefit 146 a month to 1827 in 2023 that increase follows a 59 cola for 2022 the hefty increase in january is meant to offset high inflation which clocked in at 82 in september its seventh consecutive month at 8 or higher but rising prices may have crested according to the federal reserve’s most recent summary of economic projections inflation is expected to dip to 28 in 2023 economists expect inflation to decline further to 23 in 2024 before returning to the fed’s 2 target rate by the end of 2025 in a bad recession prices likely would moderate further than that or even decline social security never lowers benefits so in a deflationary year retirees would see their real income grow but the increase wouldn’t be permanent the government calculates the annual cola using the consumer price index for urban wage earners and clerical workers or cpiw a subset of the broader consumer price index the 87 increase in january is based on the change in the cpiw from the third quarter of the past year according to the ssa retirees won’t get another cola until prices increase above their current levels even if that takes more than one year colas affect almost 70 million americans who receive social security or supplemental security income benefits amid high inflation rates 43 of seniors say they have reduced their discretionary spending this year according to a new survey from the employee benefit research institute the poll found that 27 of seniors are spending more money each month than they can afford up from 17 in 2020 the federal reserve has been raising interest rates to drive down demand for goods and services and higher borrowing costs already have cooled the housing market a recession would reduce consumer demand even more slowing down inflation and potentially leading to price decreases for many products according to rob williams a managing director at the schwab center for financial research lower prices would mean more buying power for seniors until inflation picks up again williams said “these higher payments will continue” he said adding that if deflation occurs seniors “could end up coming out ahead” of course if a recession leads to deflation that would result in lower colas in subsequent years as prices caught up in fact following the financial crisis there were no colas given at the beginning of 2010 or 2011 the cola that went into effect in january 2009 was 58 the highest in 27 years based on rising prices the previous year so as the economy fell apart late in 2008 and consumer demand decreased seniors had more purchasing power even though they would go two years without another raise in benefits according to dr jason fichtner senior fellow at the alliance for lifetime income which educates consumers about annuities “it took two full years of slow inflation before you got back up to the point where a cola was automatically required” he said “the cola is locked in so seniors got the costofliving increase while prices were dropping”  a sharp drop in energy prices can quickly lower inflation there also was no cola at the beginning of 2016 largely due to falling gasoline prices and the following year it was only 03 the us last experienced a serious bout of widespread deflation during the great depression when consumer prices fell 25 from 1929 to 1933 according to the federal reserve bank of st louis but japan has had deflation for much of the past two decades right now of course deflation is far from anyone’s mind with the us experiencing its worst inflation in decades the 87 cola for 2023 should make a difference to millions of seniors overall social security benefits represent about 30 of income for elderly americans according to an ssa fact sheet that is the average many seniors are far more dependent on social security among elderly beneficiaries 37 of men and 42 of women receive at least half of their income from social security according to the ssa for those seniors next year’s cola is significant fichtner said “i do think people are going to notice it” he said “for people with budget constraints living off social security or mostly off social security that’s a significant increase it’s going to help them pay the bills” with interest rates rising seniors who don’t need their cola to pay for essentials should consider paying off creditcard debt according to connor spiro senior financial consultant for john hancock alternatively they could add to their rainyday fund recognizing that most seniors will face an unexpected expense at some point he said the ebri survey found that 69 of seniors had at least three months of emergency savings “if they don’t have highinterest debt they might want to increase the amount they’re saving and create a little buffer there” spiro said kelly lavigne vice president of consumer insights at allianz life insurance co says it is always wise to save a few extra bucks each month especially with healthcare costs rising he adds “there’s always the idea that i don’t know how many more years i’ve got left so i’m going to spend it there are two schools of thought there”