Exciting News: Cost-of-Living Adjustment for 2023!
As you’ve probably noticed, the cost of living, from groceries to gas to housing, has risen in 2023. In response to inflation affecting most household budgets, the Social Security Administration has announced a substantial cost-of-living increase in benefits for older Americans.
An 8.7 percent cost-of-living adjustment (COLA) will take effect in January 2023 for over 65 million Social Security beneficiaries, with increased payments for more than 7 million SSI beneficiaries beginning on December 30, 2022. (Note: Some individuals receive both Social Security and SSI benefits.)
Starting in January, monthly Social Security checks received an impressive 8.7% boost, marking the largest cost-of-living increase in 40 years. To provide context, the Social Security cost-of-living increase was just 1.3% in 2021 and has averaged 1.4% over the past decade, with the last increase exceeding 5% in 2009.
The Federal benefit rates rise with the increase in the cost of living, as measured by the Department of Labor’s Consumer Price Index through the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This adjustment aims to counteract the impact of inflation, with the annual inflation rate measured at 5.9% in September.
Approximately 65 million Americans, including retirees and disabled individuals, receive Social Security. According to the Social Security Administration, the average recipient received $1,565 per month in 2021 and will receive $1,657 in 2022. For the average couple with both individuals receiving benefits, the monthly payment increased from $2,599 in 2021 to $2,753 in 2022.
Additionally, the maximum benefit for a worker retiring at full retirement age will rise from $3,148 per month to $3,345 per month. The maximum amount of a worker’s wages subject to Social Security taxes will also increase from $142,800 to $147,000.
Social Security plays a crucial role in the income of millions of Americans. Almost nine out of ten people aged 65 and over received Social Security benefits as of the end of 2020. Among elderly beneficiaries, 37% of men and 42% of women receive 50% or more of their total income from Social Security benefits, and 12% of men and 15% of women receive 90% or more of their income from Social Security.
It’s not just retirees who rely on Social Security; disabled workers and their dependents accounted for 13.1% of the benefits paid in 2020, and survivors of deceased workers received 11.7%. Many dependents of retirees, disabled workers, and spouses also depend on these benefits.
While this larger-than-usual increase will undoubtedly assist those receiving benefits, concerns linger that it may not be sufficient. Some argue that the formula used to calculate the cost-of-living increase is flawed, as most seniors have expenses significantly different from those of younger working Americans. Retirees tend to spend less on items like gas and groceries but face higher medical costs, which often outpace overall inflation.
Acting Commissioner Kilolo Kijakazi remarked, “Medicare premiums are going down, and Social Security benefits are going up in 2023, giving seniors more peace of mind and breathing room. This substantial Social Security cost-of-living adjustment, the first time in over a decade that Medicare premiums are not rising, shows that we can provide more support to older Americans who count on the benefits they have earned.”
Nancy Altman, President of Social Security Works, shared similar sentiments, stating, “After four decades of inadequate Social Security COLAs, beneficiaries are finally expected to receive one that more closely matches their rising costs. But large as it may appear on paper, it is not nearly enough for seniors and people with disabilities on fixed incomes to make ends meet.”
Other adjustments taking effect in January, based on the increase in average wages, include the taxable maximum for Social Security taxes rising to $160,200 from $147,000.
How to Find More Information:
Social Security and SSI beneficiaries are typically notified by mail starting in early December about their new benefit amount. The quickest way to find out your new benefit amount is to access your personal mySocial Security account to view the COLA notice online. It’s secure, easy, and allows you to find out before the mail arrives. You can also opt to receive a text or email alert when there is a new message from Social Security—such as your COLA notice—waiting for you, rather than receiving a letter in the mail. Create or access your mySocial Security account online at www.ssa.gov/myaccount
