With 2023 rapidly approaching, Social Security beneficiaries will soon learn how much their monthly payments will increase next year based on the current quarter’s inflation rate. According to The Senior Citizens League, a non-partisan seniors advocacy group, the predicted Social Security cost-of-living adjustment (COLA) for 2023 is 8.7%.
Its forecast was modified on September 13, 2022, in response to the Labor Department’s Consumer Price Index for All Urban Consumers (CPI-U) report. According to the report, overall inflation jumped 8.3% in August compared to the previous year, as monthly rises in food, lodging, and medical care offset a sharp decline in energy and gas prices. The August increase followed an 8.5% increase in July.
The Social Security COLA is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which differs somewhat from the CPI-U. The COLA is determined using the year’s average inflation rate in the third quarter. When those results are released, the data from July, August, and September will be combined and divided by three to calculate the average. The third quarter 2021 average will then be compared to the 2022 figure to establish the percentage change for 2023.
The group’s most recent COLA projection is significantly lower than earlier estimates this year, which projected a Social Security hike of up to 10.5% in 2023. Even an 8.7% growth would be the greatest in more than four decades.
“A COLA of 8.7% is highly exceptional, and it would be the highest ever earned by the vast majority of Social Security pensioners alive now,” said Mary Johnson, Senior Citizens League’s Social Security and Medicare policy expert. “It was higher only three other times since the introduction of automatic adjustments (1979-1981).”
The Senior Citizens League and other senior advocacy organizations have frequently challenged the formula used to calculate the Social Security COLA since it does not account for increases in the Medicare Part B premium, which is 14.5% more this year than in 2021. This frequently results in Social Security payouts for seniors falling short of the real inflation rate.
According to The Senior Citizens League, the Medicare Part B premium and other fees are typically disclosed in mid-November. It does not anticipate a significant increase in premiums in 2023.
Even if you exclude this year’s higher Medicare costs, the 2022 COLA of 5.9% is already considerably below the total inflation rate. According to the Senior Citizens League, the August COLA fell short by an average of 48%.
What Does 8.7% COLA Imply?
According to The Senior Citizens League, an 8.7% COLA increase next year means that the average Social Security beneficiary would receive $1,656 in monthly payments, an increase of $144.10 per month. Retirees can calculate their exact increase by multiplying their current check amounts by .087.
“COLAs are supposed to help sustain the purchasing power of Social Security income when prices rise,” according to the Senior Citizens League’s estimate. They are permanent increases that will gradually boost retirees’ total Social Security benefits throughout their retirement. Without a COLA that keeps up with inflation, Social Security benefits buy less and less over time, which can be difficult, especially as older Americans live longer lives in retirement.
Medicare Part B Premiums May Fall in 2023
While costs for nearly everything has risen in line with inflation this year, it is obvious that Medicare premiums will fall in 2023.
It is the duty of The Centers for Medicare & Medicaid Services (CMS) to announce the 2023 Medicare Part A and Part B premiums, deductibles, and coinsurance amounts, as well as the 2023 Medicare Part D income-related monthly adjustment amounts.
The Social Security Act establishes the monthly Medicare Part B premium, deductible, and coinsurance rates. The regular monthly cost for Medicare Part B users in 2023 will be $164.90, a $5.20 drop from $170.10 in 2022. In 2023, the yearly deductible for all Medicare Part B participants is $226, a $7 drop from the previous year’s $233.
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I grew up in Dubuque, Iowa, where I learned the concepts of hard work and the value of a dollar. I spent years in Boy Scouts and achieved the honor of Eagle Scout. I graduated from Iowa State University and moved to Chicago and spent a few years managing restaurants. I then started working in financial services and insurance helping families prepare for the high cost of college for their children. After spending years in the insurance industry, I moved to Arizona and started working with Federal Employees offing education and options on their benefits. I became a Financial Advisor / Fiduciary to further help people properly plan for the future. I enjoy cooking and traveling in my free time.
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