If you're one of the 70 million Americans receiving Social Security benefits, you saw a modest increase in the monthly benefit payments you received in 2022. At the beginning of 2022, the Social Security cost-of-living increase was 5.9 percent, much higher than the 1.7 percent recipients saw in 2021. And in 2023, the increase is even greater at 8.7 percent.
So, when does the Social Security cost-of-living increase happen in 2023?
If you're anxiously waiting to receive a small bump in your Social Security check in 2023, keep reading. We have all the details on when the cost-of-living adjustment takes effect and why it's so much higher.
Here's when you'll begin receiving your Social Security cost-of-living adjustment in 2023.
In October 2022, the Social Security Administration (SSA) announced that it would be increasing Social Security benefits by 8.7 percent in 2023. This means that millions of Social Security beneficiaries will see their benefits increase by about $140 or more per month beginning in January 2023. And if your payment falls on a weekend or holiday, you can expect your payment to hit your account the business day prior.
For example, beneficiaries who are due a Social Security check on Jan. 1, 2023, will see their payments deposited on Dec. 30, 2022, as Jan. 1 falls on a Sunday. As for those who also receive Supplemental Security Income (SSI), increased payments will begin on Dec. 30, 2022.
In addition to increasing benefits, the SSA also announced that it would be increasing the maximum amount of earnings subject to the Social Security tax to $160,200.
Inflation impacts the Social Security cost-of-living adjustments.
What’s causing the increase in the cost-of-living adjustment for 2023? The simple answer is inflation and rising consumer costs. The annual cost-of-living adjustment is based on what’s happening with the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W. It's usually calculated in October.
“When the prices on the goods and services that retirees depend on go through the roof, their Social Security benefits don’t buy as much, and that causes enormous financial stress for all retirees," said Mary Johnson, a Social Security policy analyst for The Senior Citizens League, in a statement.
The last time we saw such a large increase in COLA was in 1980 when benefits went up by 14.1 percent. Although the COLA went down a bit the following year, it was still quite high at 11.2 percent.
The Social Security buying power has dropped.
The buying power of Social Security benefits has decreased by 30 percent since 2000, says Senior Citizen League representatives. To put it in perspective, $100 worth of groceries in the year 2000 would now cost you $172, according to CNBC.
While the increase in Social Society benefits is expected to help beneficiaries combat rising costs, Dan Adcock, who is the director of government relations and policy at the National Committee to Preserve Social Security and Medicare, shares a differing view. According to Adcock, “The COLAs really are about people treading water; they’re not increases in benefits,” CNBC shared.
He added, "They’re more trying to provide inflation protection so that people can maintain their standard of living." Although the increase is slight considering how expensive essential items are these days, it's certainly something Social Security recipients are looking forward to.