Social Security: 2023 COLA Will Be Announced Thursday — How Much Could It Be?
Unless the U.S. inflation rate took a swift and miraculous dive in September, the Social Security Administration this week is expected to announce its biggest annual cost-of-living adjustment in more than 40 years.
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The official announcement is scheduled for Thursday, Oct. 13, following the release of the Labor Department’s Consumer Price Index data for September. Based on CPI data through August, the estimated Social Security COLA for 2023 is 8.7%, according to The Senior Citizens League, a non-partisan seniors advocacy group.
An 8.7% increase in the 2023 COLA would translate into an average monthly increase of $144.10, CBS News reported. This would boost the typical benefit to $1,802 a month from $1,658 in 2022.
The 2023 COLA will go into effect with the December 2022 benefits, but those payments will be made in January 2023, CBS News noted. Recipients with a birthday that falls on the 1st to the 10th of the month will get their first check with the 2023 COLA on Jan. 11, 2023. Those with a birthday from the 11th to the 20th will get their first check on Jan. 18 and those with a birthday from the 21st to the 31st will get their first check on Jan. 25.
Even if the inflation data is much improved for September, you can still expect the COLA to be at least 8.5% — the biggest annual increase since the 11.2% COLA in 1981.
The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. It is calculated by using the average rate of inflation in the third quarter of the year. When those figures come out, the data for July, August and September will be added together and divided by three to get the average. The 2022 number will then be compared with the third quarter average of 2021 to determine the percentage of change for 2023.
There’s no secret about why the 2023 COLA will be so high — look no further than the 2022 inflation rate, which is also the highest since 1981.
“This may be the first and possibly the last time that beneficiaries today receive a COLA this high,” Mary Johnson, The Senior Citizen League’s Social Security and Medicare policy analyst, said in an email to GOBankingRates. “There were only three other times since the start of automatic inflation adjustments that COLAs were higher (1979-1981).”
Those adjustments began in 1975 as a way to ensure Social Security recipients have enough income to deal with higher consumer prices. But it doesn’t always work out that way. For example, this year’s COLA is 5.9%, but the inflation rate for 2022 has been running higher than 8%.
“Without a COLA that adequately keeps pace with inflation, Social Security benefits purchase less over time, and that can create hardships especially as older Americans live longer lives in retirement,” Johnson said. “It’s too early to say how well [next year’s] COLA will keep pace with inflation in 2023.”
While seniors await the official 2023 COLA announcement, there is some good news: the Centers for Medicare and Medicaid Services recently announced lower premiums across several plans. These included a drop in Medicare Part B premium costs for fiscal year 2023 vs. 2022 — the first decline in a decade.
On the downside, rising Social Security income due to a steep 2023 COLA could push some Medicare recipients into a higher income bracket. This could affect the monthly premium costs for both lower and higher income seniors.
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“Those who receive low-income assistance for healthcare costs can be subject to trims in the amount of assistance they receive through Medicare Savings programs or Medicare Extra Help, or Medicaid,” Johnson said. “Increased incomes due to the COLA can make older and disabled beneficiaries ineligible for the level of benefits they currently receive when their income exceeds the limits.”
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