Senior citizens and millions of other Social Security recipients in the US will soon receive their biggest benefit boost since 1981, with the pension program set to deliver aIn 2023.
According to the Social Security Administration, the annual cost-of-living adjustment, or COLA, takes effect with December benefits, but those payments will be made in January 2023. With the increase, the average benefit check will increase by more than $140 to $1,827 per month in 2022, compared to the typical benefit of $1,681.
The Social Security Administration adjusts payments annually based on the inflation rate, which this year hit its highest level in four decades. Seniors lost purchasing power during this year as the 5.9% price increase they receive in 2022 is far less than this year’s increase. Nearly 4 in 10 seniors said they depleted their emergency savings this year to stay afloat, according to an October survey by the advocacy group The Senior Citizens League.
Mary Johnson, Social Security and Medicare policy advisor, said, “Anytime they go through a loss of purchasing power, that means they’re depleting other retirement resources like savings, or putting more on credit cards or they’re going to lose Security.” NET programs.” Analyst at Senior Citizens League.
“We’ve gone through a phase right now where retirees are trying to cope and manage, and they’ve never been like this before,” he said.
The 8.7% COLA adjustment for 2023 will help seniors who are struggling with the rising cost of everything from food to gasoline, but who have had little time to rebuild their emergency savings or get back on solid financial footing. It may take time, she said.
2023 Social Security Benefits: Payment Dates
According to the Social Security Administration, next year’s January checks will be based on recipients’ dates of birth.
- For those whose birthday falls between 1st to 10th of any month, their payment is due on the second Wednesday of the month. That means the first check with the 2023 COLA will come on January 11.
- For those whose birthday falls between 11th to 20th of any month, the payment will be credited or sent by post on the third Wednesday of every month. Their first check with the enhanced COLA will come on January 18.
- If a recipient’s birthday falls between the 21st and 31st, their payments are scheduled for the fourth Wednesday of each month. Their first 2023 COLA will come on January 25.
impact of taxes, medicare premiums
While the COLA increase will be a welcome boost for Social Security’s roughly 70 million recipients, there are some implications to be aware of, Johnson said.
For example, a benefit increase may result in higher taxes for some recipients. According to the Social Security Administration, single taxpayers who receive more than $25,000 in retirement income are required to pay taxes, while the limit is $32,000 for married couples.
The average Social Security benefit for 2023 will be less than that amount, reaching about $22,000 per recipient next year. However, many seniors also have other sources of retirement income that could push them over the taxation threshold, especially after the 8.7% increase taken from their monthly benefit checks.
Of course, taxes depend on many variables, including the standard deduction, which isTo reflect inflation, and each person’s tax situation will be different.
Johnson said another issue seniors should be aware of is the effect of their higher Social Security benefits on Medicare premiums. This is mostly an issue that will affect higher-income seniors, as Medicare premiums operate on a sliding scale based on income.
Seniors who are unmarried and have an annual income of less than $97,000, as well as married people with an income of less than $194,000, will pay a standard Medicare premium of $164.90. But seniors who earn more than those thresholds will pay higher Medicare premiums, ranging from about $230 to $560 per month.
“The final consideration is to keep in mind that their income is increased by COLA, and this is a permanent bump to Social Security income,” Johnson said. “They will need to plan on a long-term basis for the most tax-efficient strategies for managing their retirement income and other decisions.”