The 8.7 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 65 million Social Security (SS) beneficiaries in January 2023. Increased payments to more than 7 million Supplemental Social Security (SSI) beneficiaries will begin on Dec. 30, 2022.
The purpose of COLA is to ensure that the purchasing power of SS and SSI benefits is not eroded by inflation. The increase is aimed at helping to cover the rising cost of food, housing, healthcare and other essentials, otherwise known as inflation. Rising prices on a variety of goods and services have lifted inflation to its highest level in 40 years. The consumer price index for September shows prices rose 8.2 percent over the last year, despite the Federal Reserve’s efforts to stabilize costs by hiking interest rates. Every month in 2022, inflation far exceeded the 5.9 percent cost-of-living (COLA) increase that was set at the end of 2021, meaning that 2021’s COLA did not meet current economic strains.
Will this newest cost-of-living adjustment (COLA) be enough to make a significant difference for SS and SSI recipients? What problems might they still face?
Dollars & Cents
• The average retired person will see an increase of about $140 per month. The average monthly payment to a retired beneficiary will be $1,827.
• The maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200.
• The earnings limit for workers who are younger than “full” retirement age will increase to $21,240. (SSA deducts $1 from benefits for each $2 earned over $21,240.)
• The earnings limit for people reaching their “full” retirement age in 2023 will increase to $56,520. (SSA deduct $1 from benefits for each $3 earned over $56,520 until the month the worker turns “full” retirement age.)
• There is no limit on earnings for workers who are “full” retirement age or older for the entire year.
• Although the vast majority of recipients are retired, around 3 million children also receive SS payments, as well as people with disabilities and those who have lost spouses.
Another important change affecting seniors in 2023 is the decrease in Medicare Part B premiums. For SS beneficiaries receiving Medicare, their new higher 2023 benefit amount was available in December through the mailed COLA notice and in their my Social Security’s Message Center. The combination of a SS benefit increase and a Medicare payment decrease is a first. If people were expecting their Medicare premiums to gobble up a substantial portion of their COLA, the good news is, that won’t be the case in 2023.
The Bottom Line
Because older people are more likely to spend money than save it, they may actually help mitigate a recession. But seniors need to pay for things that are in higher inflation categories, healthcare being the No. 1 example, so they tend to be more heavily impacted by inflation. Although these changes were enacted so that inflation
no longer drains value from SS benefits, even with the COLA increase and Medicare payment decrease, low-income seniors and others may still struggle with today’s high prices.
SSA Full Retirement Age Chart:
2023 Medicare Changes: