Social Security beneficiaries are getting a historic benefit increase. The Social Security Administration announced today that they will receive an 8.7% cost-of-living adjustment (COLA) starting in 2023. The average Social Security retiree benefit will increase $146 per month, to $1,827, from $1,681 in 2022. This is the largest COLA increase since 1982.
There are only three other times since the start of the automatic adjustments that the COLA increase was higher. The highest ever was the 14.3% increase in 1980. The 2022 5.9% bump was the largest since 1982’s 7.4% increase.
The historic COLA is a result of rising inflation. The consumer price index rose 8.3% in August from a year earlier but is easing from a 40-year high of 9.1% in June.
The annual COLA is based on a comparison of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter (July through September) of the previous year to the third quarter of the current year. The CPI-W is a monthly measure of the average prices of goods and services. More than 200 items are taken into account. The eight major categories are food and beverage, housing, apparel, transportation, medical care, recreation, education and communication, and other goods and services (smoking products, haircuts, and personal services).
Roughly 70 million people receive Social Security benefits. Beneficiaries can expect to see the 2023 COLA in their benefit checks starting in January.
Medicare premiums are going own
Most people have their Medicare Part B premium deducted directly from their Social Security benefits checks. Medicare premiums are going down in 2023. The standard Part B premium will drop by 3% to $164.90. That’s $5.20 lower than 2022. The annual deductible for Part B will be $226 in 2023, a decrease of $7 from $233 in 2022. It’s exciting to see these costs decrease after what Medicare recipients experienced in 2022. The standard Medicare Part B premium jumped $21.60 from 2021 to 2022 due to Medicare’s project spending on Aduhelm, a drug that battles Alzheimer’s. But spending was lower than expected on that drug and other Part B items and services, resulting in larger financial reserves for Part B and ultimately reduced costs to you – the Medicare beneficiary.
IRMAAs (income-related adjustment amounts) are changing for 2023. These numbers impact your Part B and Part D premiums. If you are single, IRMAAs will kick in at a modified gross income adjustment of more than $97,000, up from $91,000 in 2022. For married beneficiaries filing a joint tax return, the extra monthly charge will apply if income is above $194,000, up from $182,000 this year.
What if you haven’t claimed benefits yet
The annual COLA is applied to your benefit amount, even if you have not yet claimed Social Security, beginning the year that you become eligible (age 62). If you’re 62 now and don’t claim, your benefit is adjusted by every COLA until you claim your benefit.