Some good news for seniors and others who receive Social Security payments: Next year’s cost-of-living adjustment will be 8.7%, the largest boost in 40 years thanks to sky-high inflation.
The Social Security Administration announced the increase Thursday after September’s inflation numbers were released. The boost was expected, but will still be welcomed by the more than 70 million people who receive Social Security payments each month.
That’s not just seniors—disabled adults will also get the boost, as will survivors of insured workers and low-income individuals who receive Supplemental Security Income (SSI).
This is a big change from COLAs of the past decade. In 2021, the COLA was 1.3%; in 2020, it was 1.6%. You have to go back to July 1981—a period when the U.S. last experienced high inflation—for a COLA above 8% (it was 11.2% that year).
The adjustment is based on inflation numbers from July, August, and September of the previous year. So seniors and other recipients who have struggled against the persistently rising prices for food, housing, and other necessities will get some relief next year.
“Recipients are making up for some lost ground in purchasing power after last year’s 5.9% increase, well short of the recent inflation rate,” said Mark Hamrick, senior economic analyst at Bankrate. “Given elevated costs for food, home heating, and health care/prescription drugs, the budgets of many may remain constrained next year.”
Thursday’s announcement will add about $140 to retirees’ monthly checks, on average, with the Social Security Administration estimating that the average retiree will receive $1,827 a month in 2023. Disabled beneficiaries will receive an average of $1,483.
More than 65 million Social Security beneficiaries will see the COLA reflected in their checks starting in January. About 7 million SSI beneficiaries will get their first increase on Dec. 30, 2022, according to the Social Security Administration.
More good news for retirees? Medicare Part B premiums, which are deducted from Social Security benefits, will decrease next year, giving enrollees more breathing room.
One thing to watch: your tax bill. Social Security benefits are subject to income tax, depending on your tax status and other income. More about the potential increase in taxes here.
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