Every fall, the Social Security Administration makes an announcement that has a major impact on the 66 million people who receive benefit checks. The purpose of the annual inflation adjustment is to prevent senior citizens from losing purchasing power.
This year the agency is expected to announce its 2023 cost-of-living adjustment, or COLA, on Thursday, October 13. The Social Security Administration bases its COLA on the inflation rate during the third quarter, or July through September — with the government. It is also releasing its September inflation report on 13 October.
Based on inflation data so far, senior citizens could get a COLA of 8.7%, according to the Senior Citizens League, an advocacy group for senior citizens. This translates into an average monthly increase of $144.10, which would increase the typical benefit from $1,658 to approximately $1,802 per month.
“It’s going to the highest COLAs since 1981,” said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League. “People would, theoretically, be seeing a nice bump in their Social Security benefits this time around.”
still some seniorThe 2023 growth may not cover the growth they have seen across all of their spending — the rising inflation with which the 2022 COLA has failed to keep pace. Seniors got a 5.9% cost-of-living adjustment in 2022, but inflation went above that every month this year, touching a high of 9.1% in June.
Social Security isn’t only about a program for older Americans. It also provides benefits to approximately 9 million disabled workers and their dependents, as well as 6 million widows, widowers and children, later known as “survivor benefits”.
What is the cost of living adjustment?
In the 1970s, lawmakers implemented an automatic annual benefit increase for Social Security beneficiaries that increased payments to keep up with inflation.
Prior to this, Congress had to authorize increases to keep up with inflation, which meant that sometimes many years passed before benefits increased to seniors.
On which day will the COLA for 2023 be announced?
Experts believe the Social Security Administration will announce an adjustment to the cost of living on October 13. At that time the agency released its 2022 COLA announcement last year, and on the same day the government will release inflation data for September.
Does the COLA accurately reflect the inflation that is affecting senior citizens?
Some advocates say it is falling behind, partly because the formula used by the Social Security Administration relies on an inflation measure called the Consumer Price Index, or CPI-W, for urban wage earners and clerical workers.
Some seniors and their advocates have argued that the CPI-W does not accurately reflect the price pressures facing older Americans.
The CPI-W overestimates gasoline and transportation costs, which are more common expenses among commuting workers than retirees. It also puts a lower burden on medical costs, which are generally higher for older Americans.
How will this year’s COLA compare to previous years?
This is likely to be the biggest since 1981, when the US was facing another round of high inflation.
That year, senior citizens got a benefit of 11.2%. There are only two other years that seniors received COLAs higher than the forecast for 2023: 1980, when benefits increased by 14.3%; and 1979, when profits rose 9.9%.
There have also been years when beneficiaries did not get hit, such as in 2009 and 2010, when COLA was 0% due to flatline inflation during the years after the financial crisis.
Will Medical Costs Eat Into 2023 COLAs?
There is some good news on this front.
Medicare, the health insurance plan for older Americans, said last month that it wouldAbout 3% next year for its Medicare Part B plan.
This is important because Medicare’s Part B plans, which cover regular doctor visits and other outpatient care, raised their premiums in 2022.An increase that consumed much of the cost-to-life adjustment senior citizens received on their Social Security checks.
The typical Part B premium will be reduced by $5.20 per month, reducing the standard monthly premium to $164.90. About 85% to 90% of Americans pay the standard rate on the government health insurance program, with premiums deducted directly from their Social Security checks.
Another piece of good news is the insulin price cap for Medicare beneficiaries, guided by the Inflation Reduction Act. By 2023, Medicare seniors will pay no more than $35 per month for the drug.
However, one of the most influential provisions of the Inflation Reduction Act for medical costs is a cap of $2,000 per year.– Won’t take effect until 2025, meaning some seniors could still face higher drug costs and out-of-pocket spending in 2023.
In what month will I get a cola hike?
Even though the Social Security Administration will announce the adjustment this week, seniors and others in the program will have to wait until January to receive their higher payouts.
While the COLA will actually go into effect with benefits for December 2022, those payments will be made in January 2023.
Your January 2023 check will be sent based on your date of birth:
- If your birthday falls on the 1st through 10th of the month, your payments fall on the second Wednesday of the month. This means the first check with a 2023 COLA will land on January 11.
- If your birthday falls on the 11th to 20th, your payments are due on the third Wednesday of each month. Your first 2023 COLA will come with your January 18 benefit.
- If your birthday falls on the 21st through 31st, your payments are scheduled for the fourth Wednesday of each month. Your first 2023 COLA will come with your January 25 check.