Social Security beneficiaries may see an income boost in 2023 thanks to a large cost-of-living adjustment (COLA) set to be announced tomorrow morning.
The Social Security Administration (SSA) will release the COLA figure—anticipated to be around 8.7 percent — following the Bureau of Labor Statistics’ (BLS) publication of the September Consumer Price Index.
The BLS data is scheduled to become public at 8:30 am and the SSA will release the final COLA figure shortly thereafter.
A COLA as large as 8.7 percent has not been seen in four decades. The increase is intended to help beneficiaries pay for goods and services made more expensive by inflation.
Every year since 1975, the Social Security COLA has automatically adjusted based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. Average annual COLAs increased by just 1.7 percent between 2010 and 2020.
As COLAs typically reflect inflation rates, adjustments have risen above 8.7 percent only three times before, between 1979 and 1981, when inflation reached 14 percent.
Over 70 million Americans receive Social Security benefits, the majority of whom are retirees. The Senior Citizens League, a bipartisan advocacy group, estimates an 8.7 percent hike will increase the average monthly retiree check by around $144.
A large proportion of retirees’ Social Security incomes goes towards housing, food, and healthcare costs, but for seniors also on Medicare, additional financial relief for the latter expense will come in the form of lower Part B premiums in 2023.
Part B premiums are automatically deducted from Social Security checks, and low uptake of the expensive, controversial Alzheimer’s drug aduhelm will result in a larger financial cushion for dual Social Security and Medicare beneficiaries.
However, these increases could push some over income thresholds, requiring recipients to pay income taxes on part of their Social Security benefit. Single filers who have a combined income equal to or below $25,000 pay no taxes on their benefits. For joint filers, the threshold is $32,000.
Because the majority of Social Security is funded through Federal Insurance Contributions Act taxes, a future recession coupled with high unemployment rates could affect COLAs down the line. No COLAs were paid in 2010 and 2011 following the 2008 recession.
