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Social Security Cola Increase 2023

How Is The Social Security Cost Of Living Increase Calculated

Social Security COLA increase for 2023 officially announced

The COLA benefits increase is calculated using a formula determined by Congress. Here are the basics of calculating the COLA:

  • The inflation measure used is the Consumer Price Index for Urban Wage Earners and Clerical Workers .
  • The CPI-W measures the average prices for consumer goods and services that wage earners can expect to see in urban areas.
  • The average CPI-W from the third quarter of the previous year is compared with the current year.
  • If the current years calculation is higher, theres a cost of living increase, expressed as a percentage.
  • The increase is typically announced in mid-October for Social Security benefit payments beginning in January of the following year.

Long-standing concerns about how long Social Security will remain solvent have prompted various suggestions to change the COLA calculation. Proposals include making reductions or using a different version of the consumer price index.

Big Social Security Benefits Increase For 202: Is It Enough

Kathleen Coxwell

The Social Security Administration announced a big Social Security benefits increase for 2023.

Beginning next January, Social Security paychecks will reflect a Cost of Living Adjustment of 8.7%. This is a huge bump over the modest 1.3% increase that was awarded in 2021 and even a pretty big boost over last years 5.9% bump.

Heres How Much The Average Beneficiary Can Expect To Receive From The Cost

The Social Security Administration officially announced their benefits adjustment for 2023, which will mark the highest COLA increase since 1981.

The Social Security Administration announced Thursday a decades-high increase in pay for Social Security beneficiaries for 2023.

Social Security and Supplemental Security Income benefits will increase by 8.7% in 2023, SSA announced. This will impact about 70 million Americans by increasing the average pay by $140 per month beginning in January.

This increase represents the highest adjustment since 1981, when recipients saw a cost-of-living adjustment of 11.2%. This adjustment is determined by inflation levels, specifically, the Consumer Price Index , which increased by 8.2% annually in September, according to the latest report from the Bureau of Labor Statistics .

“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,” SSA Acting Commissioner Kilolo Kijakazi said. “This years 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.”

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Can You Rely On Social Security Benefits In The Future

No matter your age, the concern about overreliance on Social Security is very real. This has been a topic of conversation among policymakers for decades. Theres a chance that Social Security benefits will be cut, or could even disappear at some point.

When planning your own retirement, think carefully about how you can build a nest egg and multiple streams of income. With long-term planning, Social Security benefits can become the cherry on top, rather than your main source of retirement income.

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.

The 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.

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How Your Social Security Benefit Gets Calculated

Many people are somewhat familiar with the numbers that go into the size of the check they get from Social Security every month. In general, higher earnings over your career will boost your benefit, as will working longer. Moreover, the earlier you claim Social Security retirement benefits between age 62 and age 70, the less you get per month.

However, the actual calculations are more complicated. The Social Security Administration looks at your earnings history and picks out the 35 years in which you earned the most on an inflation-adjusted basis. That produces what’s known as average indexed monthly earnings .

In the next step in the calculation, the SSA uses the AIME figure and plugs it into a formula in order to produce your primary insurance amount . The PIA formula is specific to people your age and becomes available when you turn 62. For instance, those who were born in 1960 and therefore reached age 62 in 2022 calculate their PIA as follows:

  • Take 90% of the first $1,024 of your AIME.
  • Add 32% of any amount between $1,024 and $6,172.
  • If there’s anything left over, add 15% of the amount over $6,172.

The percentages don’t change from year to year, but the amounts subject to each particular bracket for determining PIA do change.

When Will I See The Increase In My Social Security Check

The annual increase goes into effect with December benefits, which appear in checks dated January 2023.

Social Security payments follow a rollout schedule based on the beneficiary’s birth date: If you were born from the first day through the 10th day of the month, your benefits are paid on the second Wednesday of the month.If your birthday falls between the 11th and 20th, your check is paid on the third Wednesday, so you’ll see your first COLA increase on Jan. 18, 2023.

Retirees born between the 21st and the last day of the month receive benefits on the fourth Wednesday. In that instance, your first increase would appear on Jan. 25, 2023.

Beneficiaries should then receive letters detailing their specific benefit rate in December. You can also check your rate on the My Social Security website.

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Most Beneficiaries Pay Taxes On Social Security

In the past, Social Security taxes were seen as a tax on the wealthy. Today the Social Security Administration estimates most beneficiaries56%pay taxes on their benefits. A 8.7% COLA could push that percentage even higher.

This is a big concern because a few more years of high inflation and everybody is going to be paying taxes on 85% of their benefits, said Larry Kotlikoff, a professor of economics at Boston University and the author of Get Whats Yours, a book about navigating Social Security. This is a hidden benefit cut.

Recipients also may pay increased state taxes in the states that tax Social Security: Colorado, Connecticut, Kansas, Minnesota, Missouri, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont and West Virginia.

When Will Social Security Run Out Of Money

Social Security Benefits Increase in 2023

The trust fund that pays Social Security benefits to retirees, disabled people and their dependents will be depleted by 2035, according to the Social Security Board of Trustees June report. Thats one year later than the Board projected last year since more Americans returned to work, boosting Social Security revenue collected through federal payroll taxes. At that time, the trust fund would be sufficient to pay about 80% of scheduled benefits.

But the new COLA increase will likely move that date up since it will drain more money from the trust, said Johnson.

And if the economy falls into recession next year, as many economists are predicting, that will exacerbate the insolvency date since 90% of Social Security funding comes from payroll taxes.

A recession would be a crisis for Social Security, she said.

Elisabeth Buchwald is a personal finance and markets correspondent for USA TODAY. You can follow her on Twitter @BuchElisabeth and sign up for our Daily Money newsletter here

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Retirement Goals And Social Security Cola

When considering how to approach your retirement goals, you should account for Social Security COLA as an inflation countermeasure. But dont assume that an increase in your monthly benefit will translate to covering your expenses.

Social Security should comprise only part of your retirement income. Even though the cost of living increase can help you keep pace with some expenses, it likely wont shield you completely from inflation risk.

If you have a retirement fund and/or other investments, think about how your portfolio is structured. Although many retirees shift away from stocks to bonds and other fixed-income securities, which have historically been less risky, fixed-income returns have a hard time keeping pace with inflation. Stocks are generally more risky, but they tend to outperform bonds over long stretches. So, if you expect a long life in retirement, keeping some of your portfolio in the stock market can help you stay ahead of inflation in the long term.

If youre still working and earning an income, nows the time to be thinking about other retirement income streams, such as investing in an annuity or even a rental property. Putting together a good mix of income sources can help you reach your retirement goals and increase the chances that youll outlive your money.

Welcome The Increase But Be Mindful Of Your Spending In This High

Social Security beneficiaries are getting a big bump to their benefits in 2023.

The cost-of-living adjustment for 2023 will be 8.7%, according to the Social Security Administration the largest increase for Social Security benefits in more than four decades.

Social Securitys COLA hike can partly be attributed to high inflation, experts said. And while its a welcome result of inflation which has caused many Americans to stress over their monthly bills it may still not be enough to battle everyday expenses.

This may be the first and possibly the last time that beneficiaries today receive a COLA this high, said according to Mary Johnson, an analyst who tracks COLA for the Senior Citizens League, a nonpartisan advocacy group for retirees.

On average, Social Security benefits will increase by more than $140 per month starting in January.

The COLA is one of the most valuable feature of Social Security, helping seniors and people with disabilities keep up with expenses and ensuring they dont fall into poverty as they age, said Kathleen Romig, senior policy analyst at the Center for Budget and Policy Priorities. The COLA is easy to take for granted in years with low inflation, but this year illustrates how vital it is.

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An 87% Increase Is A Lot But Will It Be Enough

This years predicted COLA will be helpful. However, the majority of recent increases have been much more meager. And, year after year of small increases has a cumulative effect. In fact, each inadequate increase impacts a retirees income for the rest of their lives.

And, because of the way COLA is calculated previous increases did not keep pace with the increasing costs of Medicare and other retiree costs. This year, however, may be different, at least regarding Medicare.

The Good News: According to Mary Johnson of the Senior Citizens League, Over the past 21 years, COLAs have raised Social Security benefits by 55 percent but housing costs rose nearly 118 percent and healthcare costs rose 145 percent over the same period. However, this month she said, Seniors are so accustomed to the Part B premium consuming so much of the COLA I think theyre in for a pleasant surprise this year.

Many experts predict a very modest increase to Part B Medicare premium which is typically deducted from Social Security paychecks. In the recent past, the rising costs of Part B often reduced or even eliminated the COLA.

An 8.7% increase in Social Security is not really an increase if prices are up higher than that.

What Is The Cola For Social Security In 2023

Social Security COLA Increase 10.03.2022

The Social Security Administration will announce the official 2023 COLA in October 2022. Prior to that date, different groups prepare the retirement community by analyzing inflation trends and forecasting the next COLA.

Two recent forecasts peg the 2023 COLA at 10.5% and 10.8%:

  • The Senior Citizens League, an advocacy group, predicted a 10.5% COLA in July. The prediction marked an increase from the organization’s June COLA estimate of 8.6%.
  • The nonpartisan Committee for a Responsible Federal Budget said the 2023 COLA could be 10.8% if inflation remains high for the rest of the year.
  • Inflation in July, August, and September 2022 will determine the COLA that Social Security and SSI beneficiaries will receive next year. The COLA takes effect in December, and the updated benefits are paid out starting in January 2023.

    If the COLA does land at 10% or more, it will be the third-highest increase since COLAs began in 1975. The highest and second-highest COLAs were 14.3% in 1980 and 11.2% in 1981.

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    How Social Security Calculates The Cola

    Social Security benefits have been adjusted for inflation annually since 1975. Specifically, they are adjusted using the Consumer Price Index for Urban Wage Earners and Clerical Workers , an official measure of the monthly price change in a market basket of goods and services, including food, energy and medical care.

    The CPI-W is a subset of the main Consumer Price Index, which measures a broader range of retail prices . To determine the COLA, the SSA compares the average CPI-W for July, August and September to the figure for that same period the year before.

    For example, the CPI-W in July 2021 was up 6 percent from July 2020. The year-on-year increases in August and September 2021 were 5.8 percent and 5.9 percent, respectively. Averaging those three figures produced the 5.9 percent COLA that went into effect in January 2022.

    Prior to that, the COLAs for the previous 10 years had averaged 1.7 percent, ranging from zero in 2015 to 3.6 percent in 2011. If there is no inflation, theres no COLA that happened in 2009, 2010 and 2015. The biggest adjustment was 14.3 percent in 1980.

    History Of Automatic Cost

    The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income benefits is not eroded by inflation. It is based on the percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers from the third quarter of the last year a COLA was determined to the third quarter of the current year. If there is no increase, there can be no COLA.

    The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor. By law, it is the official measure used by the Social Security Administration to calculate COLAs.

    Congress enacted the COLA provision as part of the 1972 Social Security Amendments, and automatic annual COLAs began in 1975. Before that, benefits were increased only when Congress enacted special legislation.

    Beginning in 1975, Social Security started automatic annual cost-of-living allowances. The change was enacted by legislation that ties COLAs to the annual increase in the Consumer Price Index .

    The change means that inflation no longer drains value from Social Security benefits.

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    How Much Could Social Security Benefits Increase In 2023

    With the CPI for August now available, the nonprofit Senior Citizens League has predicted a COLA increase of 8.7%. That’s more modest than its claim of 10% earlier in the year, but slightly more than the 8.5% the White House is suggesting.

    Either figure would be the largest increase since 1981, when the COLA was 11.2%.

    How Much Will The Cola Increase Social Security Payments

    2023 COLA Hits a Record 8.7% | Is This Too Low???

    The COLA will result in a $146 increase per payment, making the average Social Security check $1,827.

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    Who is eligible for a Social Security COLA increase?

    Anyone who is eligible to receive Social Security benefits, including retirees over 62 years old, disabled and blind people, is eligible to receive the COLA associated with Social Security benefits.

    In some cases, the spouses, surviving spouses or surviving dependents can also collect Social Security and the Social Security increases that come along with it, according to the Social Security Administration .

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    Does The Social Security Cola Reflect Senior Spending Realities

    Although the 2023 Social Security COLA is the largest since 1981, it doesnt necessarily mean that seniors will be able to keep up with their expenses. According to advocacy group The Senior Citizens League , Social Security benefits have lost 40% of their buying power since the year 2000.

    Part of the issue, according to policy analysts at TSCL, is that the CPI-W may not accurately reflect costs faced by retirees. Seniors are seeing daily living expenses rise faster in certain areas that might not be included in the formula that determines the Social Security benefits COLA.

    Medical care and housing expenses are among the biggest cost increases to seniors on Social Security, but they are underweighted in the CPI-W, according to the TSCL. As a result, even with a benefits COLA, many retirees are unlikely to keep up with their increased costs if they rely heavily on Social Security.

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