Social Security and COLA: How Much Will Benefits Boost in 2023?
With the impending close of 2022, you might be making resolutions for the new year, including keeping a closer eye on what’s in store for Social Security and the cost-of-living adjustment — sometimes referred to with the acronym “COLA” — in 2023.
There’s good news on the horizon if you are one of the estimated 66 million Americans who receives a monthly Social Security benefit. Starting in January, Social Security and Supplemental Security Income recipients will see an increased boost of 8.7% in their 2023 checks, going up an average of $140 a month.
As always, it’s important to read the fine print and make sure you know what’s in store for you when it comes to Social Security and COLA in 2023. Here’s what you and your family can expect for your benefits in the upcoming year.
The Biggest COLA Increase in 40 Years
In 1981, the cost-of-living adjustment (COLA) to Social Security was a whopping 11.2%, which was a huge leap at the time. Since then, adjustments have not seen that big of a bump until 2022’s 5.9% increase, which was only the second time in nearly four decades that the COLA was raised over 5%. That means 2023’s 8.7% increase will be the biggest one in over 40 years.
According to the U.S. Department of Labor’s Consumer Price Index (CPI) report released last October, inflation rose 7.7% between 2021 and 2022, costing Americans a lot more for basic needs like food and gas.
Prices are likely to continue to go up in 2023, as the Federal Reserve raises interest rates and borrowing costs while simultaneously attempting to reign in inflation at 2%. If all goes according to plan, hopefully a little more money each month will help Americans with benefits through the rough economy next year.
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Adjustments Go Beyond COLA
It’s not just cost of living that’s going up, but other adjustments are also planned for January 2023. These changes will be based on the increase of average wages.
“The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200 from $147,000,” according to the SSA’s website.
“Medicare premiums are going down and Social Security benefits are going up in 2023, which will give seniors more peace of mind and breathing room,” announced acting commissioner of the Social Security Administration (SSA), Kilolo Kijakazi.
“This year’s substantial Social Security cost-of-living adjustment is the first time in over a decade that Medicare premiums are not rising and shows that we can provide more support to older Americans who count on the benefits they have earned.”
Not Everyone Will Get the Full 8.7% COLA
This is due to everyone’s various primary insurance amounts (PIA). Your PIA will be the reason you see the 8.7% COLA increase…or not. That’s because the cost-of-living adjustment is not added to your current benefit, but rather applied to your PIA, and the two might not match exactly.
If you choose to start receiving retirement benefits at your normal or full retirement age — which depending on the year you were born, is 66 or 67 — the Social Security Administration classifies that as PIA. Conversely, your payment is not reduced if you decide to retire early at 62, but it also does not increase if you hold off on retirement for later in your life at 70.
The bottom line: make sure to compare and contrast if your PIA and current benefits are similar, then plan accordingly for what your expectations are for the 2023 COLA in your monthly budget.
Double-Check You Are Signed Up Correctly
Social Security is tricky to figure out in and of itself, but it can sometimes be difficult to track and stay on top of how your benefits are changing year to year.
Don’t worry! In the 2023 Social Security COLA Announcement, Kijakazi states that as long as you set up your My Social Security account online by Nov. 15, 2022, you will be able to see the exact adjustment in your monthly payment.
If you missed that deadline, fret not. The SSA will be sending out COLA notices by mail in December 2022, so keep looking through the end of the year for any and all updates.
Early Payments Are On the Way
And not a moment too soon! Luckily, starting on Dec. 30, 2022, 7 million Americans who receive SSI benefits will notice the first COLA increase to their check.
“There are two reasons why your payment wouldn’t arrive on the first of any month: if the regular payment date falls on a holiday or a weekend,” reports CNET.
“In January 2023, the first of the month falls on a holiday and a weekend. When this happens, the administration sends the checks earlier on the nearest business day — in this case, a Friday. So instead of receiving your January 2023 check in January, you’ll get it in December of this year.”
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