Retired Americans will receive higher cost of living allowances next year as Social Security announced an 8.7 per cent increase in their monthly checks. 

On Thursday, The United States Social Security announced an 8.7 per cent cost of living adjustment for retirees. The figure is the highest cost-of-living adjustment (COLA) issued by the Social Security Administration in 40 years.

The cost-of-living adjustment will begin in 2023 and is based on the government inflation figures. The allowance adjustment was released after the Labor Department announced the Consumer Price Index for September, at 8.2 per cent. 

The allowance bump will aid recipients the rising costs on goods and services driven by rising inflation.

“Social Security is the largest source of retirement income for most Americans and provides nearly all income for one in four seniors,” Jo Ann Jenkins, the CEO of the American Association of Retired Persons (AARP), said in a statement.“The guaranteed benefits provided by Social Security, including the annual COLA, are more crucial than ever as high inflation remains a problem for older Americans.”

In August, Social Security paid benefits to 52.5 million people over 65. However, other beneficiaries, such as survivors of insured workers and recipients of disability benefits and Supplemental Security Income, added 17.9 million people to the total, according to data from the Social Security Administration.

Between 2010 and 2020, average annual COLAs increased by just 1.7 per cent, and COLAs had only risen above 8.7 per cent three times;  between 1979 and 1981 at 9.9 per cent, 14.3 per cent and 11.2 per cent, respectively.