SSA Reveals Social Security Benefits Will Increase Dramatically in 2023
Social Security benefits are adjusted annually to help beneficiaries as inflation rises. The 2023 COLA increase will be 8.7 percent, which is about $140 or more per month.
The Social Security Administration (SSA) offers a cost-of-living adjustment (COLA) each year based on the cost of goods. This increase gives senior citizens reliant on social security checks the same purchasing power even as inflation rises.
On Oct. 13, 2022, the SSA finally revealed how much the social security COLA increase will be in 2023.
Due to soaring inflation in 2022, the CPI-W, the measure that COLA increases are based on, is very high. In September 2022, a nonpartisan senior group, the Senior Citizens League, estimated that the COLA could increase by 8.7 percent in 2023.
Read on to find out how accurate the estimate was and how much more Social Security recipients will receive next year.
Social Security beneficiaries will receive an 8.7 percent increase in benefits in 2023.
The SSA has confirmed that it will be increasing Social Security benefits by 8.7 percent in 2023. Beginning January 2023, millions of people will receive an increase of about $140 (or more) per month.
In an SSA press release, acting Commissioner Kilolo Kijakazi stated, "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."
The SSA also announced that starting in January 2023, the maximum amount of earnings subject to the Social Security tax will also increase from $147,000 to $160,200.
Some lawmakers want to change the price index that determines annual COLA increases.
Legislators, including senators Bernie Sanders and Elizabeth Warren, aim to change the measure used to determine annual cost of living increases. They, along with fellow Democrats, propose changes to social security, including changing the COLA measurement from the CPI-W to the CPI-E.
Currently, annual benefit increases are determined based on the consumer price index for urban wage earners and clerical workers, or CPI-W. Third-quarter data from the CPI-W is the basis of COLA increases, meaning costs in July, August, and September.
This is a measure of urban workers’ spending.
The CPI-E is the consumer price index for the elderly. One might assume that the CPI-E represents the spending of senior citizens more accurately, though it isn't a perfect indicator of those habits.
The Center for Retirement Research at Boston College noted in 2021 that the CPI-E gives more weight to healthcare costs, given that the elderly tend to spend more in that area.
The center also said that the CPI-E has risen faster than the CPI-W for about 20 years, but that the gap is narrowing.
Changing the measure used to determine the COLA increases to the elderly-focused spending index wouldn’t necessarily increase benefits to retirees. The Center for Retirement Research noted that using the CPI-E for 2022 would have resulted in a smaller 4.8 percent COLA rather than the 5.9 percent increase that beneficiaries saw.
Joe Biden supports Social Security reform.
The Social Security 2100 Act is a reintroduced House proposal that Democrats support. Connecticut representative John Larson, who brought forth the bill, heads the House Ways and Means subcommittee on social security. The proposed bill will combine some of President Joe Biden’s proposals with subcommittee initiatives.
The goal of the act is to expand social security benefits and offer an extension to the date when the SSA’s trust funds might be depleted. In addition to boosting benefits, the proposal would make cost-of-living adjustments based on the CPI-E rather than the CPI-W.
Social security's COLA increased by 5.9 percent in 2022.
In 2022, those who receive social security benefits and supplemental security income (SSI) benefits got a 5.9 percent raise on those payments. As CNBC noted, that was the highest increase in 40 years, until now.