Fatter Social Security checks are coming next year

Nov 2nd, 2022 | By | Category: News

Approximately 70 million Americans will see an 8.7 percent increase in their Social Security benefits and Supplemental Security Income payments in 2023—an average boost of more than $140 per month starting in January.

It’s the highest benefits increase many Social Security recipients have experienced and the biggest in the past 40 years.

Federal benefit rates increase when the cost-of-living rises, as measured by the U.S. Department of Labor’s Consumer Price Index. The index rises when inflation increases, leading to a higher cost-of-living, including higher prices for goods and services. The cost-of-living adjustment (COLA) is intended to help offset those costs.
Social Security will mail COLA notices in December to retirement, survivors, and disability beneficiaries, supplemental (SSI) recipients, and representative payees.
“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,” said Kilolo Kijakazi, the acting commissioner of the Social Security Administration. He added that for the first time in over a decade, Medicare premiums aren’t rising, showing “that we can provide more support to older Americans who count on the benefits they have earned.”
January 2023 also is when other changes will happen based on the increase in the national average wage index. For example, the maximum amount of earnings subject to Social Security payroll tax in 2023 will be higher. The retirement earnings test exempt amount will also change, officials said.
2022’s COLA, which increased the average retirement benefit by about $92 a month, was partly offset by a record $21.60-a-month hike in the standard Medicare Part B premium, which for most Medicare enrollees is deducted directly from Social Security payments. In 2023, the opposite will happen with a larger COLA and a rare drop in premiums for Part B, the portion of Medicare that covers outpatient services such as doctor visits. AARP noted that will leave more money for Social Security beneficiaries.
Fatter Social Security checks are welcome but not a complete solution to the worsening financial situations of many older adults, according to the National Council on Aging (NCOA), an advocacy organization.
While the 2023 increase in benefits “is historic and needed, it’s also inadequate for the millions of older Americans who face skyrocketing housing and health care costs across the country,” NCOA said in a prepared statement. “People age 65-plus are the only group for which poverty increased last year, according to the U.S. Census Bureau. We now have almost 6 million older adults who can’t age with dignity. This is a clear indication that our nation’s support programs aren’t meeting today’s realities.
“As always, poverty is higher for women and people of color. Many of them had low wages throughout their working lives, which means they have lower Social Security benefits. The average Social Security retirement benefit in January 2022 was about $1,600, but many are lucky if they have even that. One in four of those receiving Social Security depend on it for 90 percent of their income. We need to make Social Security more responsive to the needs and circumstances of women by eliminating remaining gender inequities.”
NCOA also contended that using the Consumer Price Index “for the COLA increase is inadequate. The Elder Index is a more accurate measure of the income older adults need to meet their basic needs. Developed by the Gerontology Institute at the University of Massachusetts-Boston, the Elder Index includes the costs of housing, healthcare, transportation, and food. It’s the only adequacy measure that is designed specifically for older people.”
AARP noted the Social Security COLA, unlike other retirement resources such as 401(k) accounts and private-sector pensions, is designed to keep up with inflation.
“The guaranteed benefits provided by Social Security, including the annual COLA, are more crucial than ever as high inflation remains a problem for older Americans,” said JoAnn Jenkins, AARP’s chief executive officer. “The automatic adjustment helps ensure the benefit doesn’t erode over time due to rising prices.”