Social Security payments to soar 8.7% in 2023 after highest COLA increase in 40 years
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The Social Security Administration announced that it’s set to increase benefits to recipients by 8.7 percent in 2023. The cost-of-living adjustment (COLA) will apply to about 65 million who receive Social Security and more than 7 million who receive Supplemental Security Income. The increase means the average Social Security monthly benefit check will rise by more than $140.
The big jump follows last year’s increase of 5.9 percent, and it’s the largest boost since 1981 when benefits increased a whopping 11.2 percent after the U.S. suffered a bout of abnormally high inflation.
Along with the increase in benefits is an increase in wages subject to Social Security taxes, what’s called the taxable minimum. In 2023, workers will pay Social Security taxes on wages of up to $160,200, up from $147,000 in 2022. The change will become effective in January. The tax rate on those wages, 6.2 percent, will remain the same in the coming year, however.
Faced with soaring inflation in 2022, the jump in benefits is welcome news to retirees and those who depend on Social Security for a significant portion of their income. Those who rely significantly on these benefits have been hit hard, as prices on everyday goods continue to leap higher.
Of course, while those increased monthly checks will benefit seniors, the higher taxable minimum means that higher-earning Americans could face more in taxes to fund the program.
Social Security recipients should hear in December about their exact new benefit amount, and they can also check their my Social Security account for details. The average benefit check should jump nicely with the latest COLA, however.
How this boost compares to recent COLA increases
As of September 2022, the average recipient of Social Security brought in a check of $1,547.87 each month. But the average retired worker did a little better, pulling in $1,673.88 each month.
How much would the new average payment be? The rate of increase is based on the Consumer Price Index for urban wage earners and clerical workers, known as CPI-W. With the announced increases for 2023, those figures would rise to about $1,683 and $1,820, respectively.
Here are the announced increases over the last decade:
|Year||COLA increase||Year||COLA increase|
Source: Social Security Administration
This year’s increase vastly outpaces any in the recent past, and you’d have to go all the way back to 1981 before you found a larger boost. Social Security does not announce decreases in benefits. Rather, it simply does not announce an increase, as happened in 2010 and 2015.
While this year’s COLA is a nice boost in income, Social Security recipients have had to live through soaring prices to get it. Those on the brink of claiming their benefit may want to carefully consider when is the best time to file for Social Security. You could earn tens of thousands more by claiming at the right time. Here’s how to estimate your benefits in retirement.