Story at a glance
- The cost-of-living adjustment increase of 8.7 percent is the highest in four decades.
- The boost will help beneficiaries meet the rising costs of goods and services driven by inflation.
- However, higher incomes could push some over taxable income thresholds.
Social Security beneficiaries can expect to see an 8.7 percent increase in their monthly checks beginning in 2023.
The figure is the highest cost-of-living adjustment (COLA) issued by the Social Security Administration in 40 years.
The boost will help recipients, many of whom are retirees, meet higher costs on goods and services driven by rising inflation.
Each year, COLAs are automatically applied based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.
The COLA is equal to the percent increase the Senior Citizens League, a bipartisan advocacy group, estimated in September.
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Between 2010 and 2020, average annual COLAs increased by just 1.7 percent, while COLAs have only risen above 8.7 percent three times — between 1979 and 1981 at 9.9 percent, 14.3 percent and 11.2 percent, respectively.
In 1980, inflation was above 14 percent yet declined to 3.5 percent in the latter half of the decade; the COLA followed suit, declining to 5.4 percent in 1990.
The adjustments are intended to improve buying power of the nearly 70 million Americans who receive Social Security benefits.
For the average retiree, monthly benefits come out to around $1,656, and the 8.7 percent increase means these beneficiaries may see $144 extra cash in each payment, beginning in 2023.
“Social Security is the largest source of retirement income for most Americans and provides nearly all income for one in four seniors,” AARP CEO Jo Ann Jenkins said in a statement. “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.”
Data from July show more than half of older women living alone are poor according to federal poverty standards or don’t have enough money to afford essential expenses. That total is lower for men, at 45 percent.
A large proportion of retirees’ Social Security incomes goes toward housing, food and health care 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. The low uptake of the expensive, controversial Alzheimer’s drug aduhelm will result in a larger financial cushion for dual Social Security and Medicare beneficiaries next year.
However, the extra cash in hand could push some seniors over income thresholds, meaning they could be taxed on their Social Security benefits.
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.
The majority of Social Security is funded through Federal Insurance Contributions Act taxes and a looming recession resulting in high unemployment rates could threaten COLAs down the line. Following the 2008 recession, no COLAs were paid in 2010 and 2011.
–Updated at 8:58 a.m.
Published on Oct 13,2022