The cost-of-living adjustment, or COLA, for Social Security next year will be 8.7%, the highest increase since 1981, when it was 11.2%. The boost reflects ongoing inflation, especially compared with the 5.9% COLA set for 2022. Show
"A COLA of 8.7% is extremely rare and would be the highest ever received by most Social Security beneficiaries alive today," Senior Citizens League policy analyst Mary Johnson said in an earlier statement. In fact, the adjustment has gone above 7% only five times since 1975, when annual automatic COLAs were first introduced. The 2023 COLA is tied to the Consumer Price Index, which charts year-to-year price fluctuations for goods and services, for the third quarter of 2022. The CPI dipped to 8.5% in July and was down to 8.3% in August. On Thursday, the US Department of Labor Statistics announced the CPI for September was 8.2%, Read on to learn more about Social Security benefits for 2023, including when the increase will appear and how to find out
how much you'll be getting. What is the Cost of Living Adjustment (COLA)?Since 1975, Social Security benefits have been adjusted automatically each year, based on fluctuations in inflation, as determined by the Consumer Price Index For Urban Wage Earners And Clerical Workers. The Social Security Administration compares the average CPI-W in the three months of the third quarter in the current year, to the same timeframe in the year prior. "The COLA increase is a valuable feature that keeps retirees from truly being tied to a 'fixed income' when managing expenses," Rob Williams, managing director of financial planning at Charles Schwab, told CNET. How much will Social Security benefits increase in 2023? Retirees saw a record increase in their Social Security checks in 2022. Next year's adjustment could be even bigger. LPETTET/Getty ImagesThe Social Security Administration has set the 2023 COLA at 8.7%, reflecting an additional $146 a month in the average check, according to AARP, or $1,827 more for the year. Predictions fluctuated greatly in the past few months: In June, the nonpartisan Committee for a Responsible Federal Budget estimated benefits would increase as much as 10.8%, or almost $180 extra on average. The following month, Marc Goldwein, the organization's senior policy director, predicted that if inflation remained on its then-current trajectory, the increase would be 11.4%, the highest ever. But, by August, Richard Johnson, director of the retirement policy program at the Urban Institute, told AARP that "somewhere in the 9% range is probably a reasonable guess." A 9% cost-of-living adjustment would add about $150 to the average Social Security check, or an additional $1,800 a year. White House Press Secretary Karine Jean-Pierre cited a $140 a month increase on Wednesday, equal to about 8.5% for the average senior receiving benefits. When will I know what my Social Security benefits are for 2023?Beneficiaries should receive letters in December detailing their specific benefit rate for next year. If you miss this letter, you can still verify your increase via the My Social Security website. When will I see the increase in my Social Security checks?The COLA goes into effect with December benefits, which appear in checks received in January 2023. Social Security payments are made on Wednesdays, following a rollout schedule based on the beneficiary's birth date. So if you were born from the 1st through the 10th of the month, your benefits are paid on the second Wednesday of the month. If your birthday falls between the 11th and 20th of the month, your checks are paid on the third Wednesday, and you'll see your first COLA increase on your Jan. 18 check. Those born between the 21st and the end of the month receive benefits on the fourth Wednesday, which, in 2023, is Jan. 25. Sollina Images | Tetra Images | Getty Images Retirees who are confronting higher prices due to record high inflation may get some welcome news this week when the Social Security Administration announces the cost-of-living adjustment for 2023. The bump to benefits is slated to be announced Thursday along with new consumer price index data for the month of September. The Senior Citizens League, a nonpartisan senior group, estimated last month that the COLA could be 8.7% next year.That would make it the highest increase in decades, topping this year's 5.9% annual cost-of-living adjustment, which was the largest in about 40 years. "These are just estimates," which means the official change for 2023 could come in higher or lower, said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League. More from Personal
Finance: The group has been estimating how the COLA will shape up each month as new CPI data is released. The Senior Citizens Leagues' estimate pointed to a higher 10.5% bump to benefits next year based on June data. However, the estimate fell to 9.6% the following monthand 8.7% based on most recent August data. The estimates are based on a subset of the CPI data known as the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. The Social Security Administration uses that measurement to determine the COLA each year. The annual COLA applies to both Social Security and Supplemental Security Income benefits. The Social Security Administration determines the annual adjustment by calculating the percentage change in the CPI-W from the third quarter of the previous year to the third quarter of the current year. The fact that the estimates have gone down in recent months does not necessarily coincide with a decline in inflation for seniors, according to Johnson. "Food prices are the first place that older consumers are going to feel inflation, and those prices were up considerably in August," Johnson said. Beneficiaries likely to see bigger checks in 2023Importantly, beneficiaries are poised to see more of the 2023 COLA increase in their monthly benefit checks, according to Johnson. The reason: Medicare Part B premiums, which are typically deducted directly from benefit checks, as the standard monthly premium are set to go down by $5.20 next year to $164.90, from $170.10 in 2022. "That will mean that beneficiaries will be able to keep pretty much all or most of their COLA increase," Johnson said. To be sure, some beneficiaries may also have withholdings for taxes taken from their monthly checks. "Before deductions, people will really see basically all of their COLA in their Social Security check," Johnson said. As the Federal Reserve has continued to raise interest rates, that may be reflected in the September CPI data and consumer confidence. The Fed hiked the target federal funds rate by 0.75 percentage point on Sept. 21. But the preceding interest rate increase of the same size that happened in July will likely have a bigger influence on the September data, according to Johnson. What could happen to benefits beyond 2023Future COLAs may not be as large as the much bigger increase anticipated for 2023. If there is a recession, that could prompt inflation to transition to deflation, where prices go down, Johnson said. In the midst of the Great Recession, a 5.8% COLA was announced in 2008 that went into effect in 2009. But the following two years had a 0% adjustment to benefits.
"We could possibly be in for something like that if we do go into a recession," Johnson said. A higher COLA in 2023 will put additional pressure on Social Security's trust funds, which already face an estimated 13-year time horizon for the ability to pay full benefits, the Committee for a Responsible Federal Budget said in June. A much-bigger COLA will add tens of billions of dollars to the program's liabilities, Maya MacGuineas, president of the Committee for a Responsible Federal Budget, told CNBC.com at the time. "That will cost the program enough money that it could bring the insolvency date forward a year sooner," MacGuineas said. What will the Social Security increase be for 2022?Last Updated: October 13, 2022
On average, Social Security benefits will increase by more than $140 per month starting in January. Federal benefit rates increase when the cost-of-living rises, as measured by the Department of Labor's Consumer Price Index (CPI-W).
How much of a raise will Social Security get in 2023?Social Security Benefits Will Jump 8.7%. That's the Biggest Raise in More Than 40 Years. The Social Security Administration on Thursday morning announced the highest cost-of-living adjustment (COLA) to benefits since the early 1980s: 8.
How much are the monthly increase for Social Security in 2022?Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 5.9 percent in 2022.
Will Social Security get a $200 raise in 2022?Yes, a bill would give Social Security recipients an extra $2,400 per year in benefits. The bill has been introduced in both the House and Senate, but an expert told VERIFY it's unlikely to pass in 2022.
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Cost of living increase for social security in 2022
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