Every fall, the Social Security Administration makes an announcement that has a big impact on the 66 million people who receive benefit checks. The annual adjustment for inflation aims to prevent older people 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 from July to September, and the government will also publish its September inflation report on October 13.
Based on inflation data so far, seniors could get an 8.7% COLA, according to the Senior Citizens League, an advocacy group for older Americans. That would translate to an average monthly increase of $144.10, increasing the typical benefit from $1,658 to approximately $1,802 per month.
“That goes to the highest COLA since 1981,” said Mary Johnson, policy analyst for Social Security and Medicare at The Senior Citizens League. “People will see, in theory, a nice increase in their Social Security benefits this time.”
However, some older people they are worried The 2023 increase may not cover the cost increase they’ve seen on all of their spending — a spiraling inflation that a 2022 COLA hasn’t been able to keep up with. Seniors in 2022 received a 5.9% cost-of-living adjustment, but inflation soared above that every month this year, peaking at 9.1% in June.
Social Security is not just a program for older Americans. It also provides benefits to about 9 million disabled workers and their dependents, as well as 6 million widows, widowers and children, the latter known as “survivors’ benefits.”
What is the cost of living adjustment?
In the 1970s, lawmakers implemented an automatic annual benefit increase for Social Security recipients that increases payments to keep up with inflation.
Before that, Congress had to authorize raises to keep up with inflation, which meant that sometimes several years would happen before seniors received increased benefits.
What day will the COLA be announced for 2023?
Experts believe the Social Security Administration will announce the cost-of-living adjustment on October 13. That’s when the agency released its COLA 2022 announcement last year, and on the same day the government is to release September inflation data.
Does the COLA accurately reflect the inflation that is affecting the elderly?
Some advocates say it’s falling behind, in part because the formula used by the Social Security Administration is based on a measure of inflation called the Consumer Price Index for Urban Wage and White Collar Workers, or CPI-W.
Some seniors and their advocates have argued that the CPI-W does not accurately reflect the pricing pressures older Americans face.
The CPI-W gives greater weight to gasoline and transportation costs, which are more common expenses among commuters than retirees. It also puts less weight on medical costs, which are typically higher for older Americans.
How will this year’s COLA compare to previous years?
It is likely to be the largest since 1981, when the US was experiencing another bout of high inflation.
That year, seniors saw an 11.2% increase in benefits. There are only two other years in which seniors received larger-than-expected COLAs in 2023: 1980, when benefits increased 14.3%; and 1979, when benefits increased by 9.9%.
There have also been several years where beneficiaries received no increase, such as in 2009 and 2010 when the COLA was 0% due to flat inflation during the years following the financial crisis.
Will medical costs affect COLA 2023?
There is some good news on this front.
Medicare, the health insurance plan for older Americans, said last month that lower your premiums next year by about 3% for your Medicare Part B plan.
That’s important because the Medicare Part B plan, which covers routine doctor visits and other outpatient care, raised its premiums in 2022 by 14.5%an increase that ate up much of the cost-of-living adjustment seniors received in their Social Security checks.
The typical Part B premium will decrease by $5.20 a month, cutting the standard monthly premium to $164.90. About 85% to 90% of Americans in the government health insurance program pay the standard rate, with the premium deducted directly from their Social Security checks.
Another piece of good news is the cap on the price of insulin for Medicare beneficiaries, which is governed by the Inflation Reduction Act. Starting in 2023, seniors with Medicare will pay no more than $35 a month for the medication.
However, one of the most impactful provisions of the Reducing Inflation Act for medical costs: a cap of $2,000 per year on out-of-pocket drug costs – won’t take effect until 2025, meaning some seniors could still face higher drug costs and out-of-pocket expenses in 2023.
In what month will I receive the COLA increase?
Although 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 payments.
While the COLA will go into effect with December 2022 benefits, 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 between the 1st and 10th of the month, your payments arrive on the second Wednesday of the month. That means the first check with COLA 2023 will arrive on January 11.
- If your birthday falls between the 11th and 20th, your payments are made on the third Wednesday of each month. Your first COLA 2023 will arrive with your January 18 benefit.
- If your birthday falls between the 21st and 31st, your payments are scheduled for the fourth Wednesday of each month. Your first COLA of 2023 will arrive with your January 25 check.
