Social Security beneficiaries are set to get the largest boost to their benefits in four decades.
The 2023 cost-of-living adjustment, or COLA, will be 8.7%, the Social Security administration announced Thursday. That’s about $140 more per month for beneficiaries.
Although the changes will take effect in December 2022, beneficiaries won’t see the COLA increase until their first Social Security checks of the new year, the SSA says.
The adjustment comes following September’s Consumer Price Index Report, which determined that prices climbed 8.2% in the 12-month period that ended in September and 0.4% between August and September. The CPI was also announced Thursday.
Here’s how 2023’s bigger benefits will impact you.
Keeping up with inflation
Social Security benefits are adjusted annually to account for inflation.
“The change means that inflation no longer drains value from Social Security benefits,” the administration says.
The SSA uses the previous year’s Consumer Price Index for Urban Wage Earners and Clerical Workers in July, August and September to determine the coming year’s COLA. So for example, 2023’s COLA was determined using the past three months’ inflation rates.
In December 2021, the administration enacted a 5.9% COLA for 2022, which at the time was the biggest adjustment since 1982. Inflation quickly outpaced this adjustment though.
The latest adjustment is expected to help beneficiaries keep up with rising prices.
As inflation has continued to rise, beneficiaries need the most support affording health care, housing and food, according to Mary Johnson, The Senior Citizens League’s social security and medicare policy analyst.
In September, increases in medical care, housing and food were the biggest contributors to inflation’s growth, according to the BLS. Over the past 12 months, health care prices rose 6.5%, housing prices rose 6.6% and food prices rose 11.2%.
Lower Medicare premiums
A boosted COLA typically does not account for changes in Medicare fees, which are automatically deducted from benefits.
In years when the change in Medicare fees, usually an increase, is greater than the COLA, beneficiaries enrolled in Medicare Part B don’t actually benefit from a higher COLA.
But in 2023, unlike years past, Medicare beneficiaries will get to keep their entire Social Security COLA.
Fees for Medicare Part B, which cover physician services, outpatient hospital services, some home health services, medical equipment and other services not covered by Part A, will decrease in 2023, according to the Centers for Medicare and Medicaid Services.
Medicare enrollees will see a standard monthly premium of $164.90, a decrease of $5.20 from 2022’s monthly premium, the CMS announced Sept. 27. The annual deductible will decrease $7, to $226 in 2023.
The last time premiums decreased was in 2012, according to The New York Times.
The 2023 decrease “is excellent news for seniors and people with disabilities who receive Medicare, most of whom have these premiums deducted directly from their Social Security payments,” Nancy Altman, president of Social Security Works, said in a Sept. 27 news release.
4 million children will also benefit
An estimated 4 million children receive Social Security benefits, according to the AARP.
Children of retired, deceased and disabled workers can receive benefits based on their parent’s earning record, AARP says. Grandchildren can also qualify for their grandparents’ benefits in some cases.
“We should understand the increase in the COLA will have a positive net benefit on the entire household — not just older members of the family,” Maya Rockeymoore Cummings, a nonresident senior fellow at Brookings Metro, part of the Brookings Institution, and the CEO of Global Policy Solutions, a social change strategy firm, told PBS News.
Low-income children and their families will benefit most from the increase, Altman told PBS.
Insolvency on the horizon
While millions will benefit from the increased COLA, there are concerns that the Social Security program will reach insolvency soon.
Granting beneficiaries more funds now means less funds for future generations, Maya MacGuineas, the Committee for a Responsible Budget’s president, told McClatchy News in an earlier interview.
According to a 2022 report from the Trustees of the Social Security and Medicare trust funds, the fund that pays retiree and survivor benefits will run out of reserves by 2034. After that, the fund will only be able to pay 77% of scheduled benefits.
Furthermore, MacGuineas says an increase in the COLA “exacerbates the spiral and cycle of inflation.” As this cycle continues, the more likely it is that the United States will fall into a recession.
“If purchasing power continues to grow, that means more pressure on (the) Fed to raise interest rates,” MacGuineas said.
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