Historic 8.7% Increase in Monthly Benefits for Social Security Recipients
If you receive Social Security, you may have heard that your benefits will jump a historic 8.7% for 2023. This increase represents the latest Cost of Living Adjustment (COLA) and recipients will receive the highest increase in decades. The last time there was a large increase was in 1981, which saw an increase of 11.2 percent. This is also a considerable increase from the 2022 COLA increase of 5.9 percent.
This is welcome news for those older Americans who count on Social Security and Supplemental Security Income (SSI) benefits as their primary source of income. Being on a fixed income is tough not to mention the current inflation with rising food and gas prices.
As many as 65 million Americans who receive benefits will feel some relief from this increase coming this January 2023. Another 7 million SSI beneficiaries will receive their benefits increase on December 30, 2022. There are some who receive both Social Security and SSI benefit payments.
What can beneficiaries expect with this increase?
Starting in January, the average retiree receiving Social Security benefits will automatically receive an increase of 8.7 percent or $146 more on their check. This is based on an average check of $1,681, which will be increased to $1,827 for an individual retiree. Couples who both receive Social Security can expect an estimated increase of $238 increasing benefits from $2,734 to the new amount of $2,972.
Estimated Average Monthly Social Security Benefits Payable in January 2023
|Type of Beneficiaries||Before 8.7% COLA||After 8.7% COLA|
|All Retired Workers||$1,681||$1,827|
|Aged Couple, Both Receiving Benefits||$2,734||$2,972|
|Widowed Mother and Two Children||$3,238||$3,520|
|Aged Widow(er) Alone||$1,567||$1,704|
|Disabled Worker, Spouse and One or More Children||$2,407||$2,616|
|All Disabled Workers||$1,364||$1,483|
Table taken from https://www.ssa.gov/news/press/factsheets/colafacts2023.pdf
How are these increases determined?
Inflation is the primary driver of the COLA (Cost of Living Adjustment). Protecting the purchasing power of Social Security and SSI beneficiaries is the reason for these increases, which are based on an increase in the Consumer Price Index for Wage Earners and Clerical Workers (CPI-W) from one year to the next year.
The Social Security Administration (SSA) calculates the COLA by comparing “the third-quarter CPI-W for the prior year to the third-quarter CPI-W in the current year.” The adjustment is based on the CPI-W difference from the two years. If there is no such increase, you will not see a COLA.
The Bureau of Labor Statistics is responsible for determining the CPI-W, which is the official SSA measurement in figuring out these adjustments designed to ensure Social Security benefits are not weakened by inflation.
Other Social Security changes for 2023
Spouses and Disabled Recipients
Social Security payments are increasing for this population. Widows, widowers, and those who are disabled and receive Social Security benefits will also see an increase in 2023. For example, support to older Americans increased. An elderly widow or widower who is living alone will receive an average increase amount of $137 monthly, while a widowed mother with two children can expect an average monthly increase of $282. Disabled workers can expect to see an increase of $119 per month but will receive a monthly increase of $209 if they have a spouse and one or more children.
Maximum Social Security Benefits
Those workers who are retiring at full retirement age in 2023 will see an increase in the maximum Social Security benefits go from $3,345 per month in 2022 to $3,627 per month. If you retire before the full retirement age (67 years old for those born after 1960), these benefits are reduced.
Maximum Taxable Earnings
The maximum taxable earnings (money that workers pay into the system) that are subject to Social Security taxes will go up for 2023 to $160,200 from $147,000 (2022). This adjusted amount is based on the increase of average U.S. wages.
Retirement Earnings Test Exempt Adjustments
If you are still working and claim retirement benefits before your full retirement age, some benefits will be withheld from Social Security ($1 withheld for every $2 earned over the limit) when you exceed a determined level of income. In 2023, this amount is $1,770 monthly ($21,240 /yr.) up from $1,630 per month in 2022 ($19,560/yr.).
If you retire in 2023 and will reach the full retirement age, you will be subject to withholdings ($1 out of every $3 earned over the limit) for every month you earn over a certain limit before you reach your full age of retirement. In 2023, this amount is $4,710 per month ($56,520/yr.), up from $4,330 monthly ($51,960/yr.) in 2022. Once you reach the month of full retirement age, there are no limits to your earnings so you will not have any benefits withheld.
It makes sense that adjustments have been made to Social Security benefits as the cost of living has increased substantially due to inflation. For more information on the details of these changes, visit the Social Security Administration website.