In 2022, we experienced the highest inflation in four decades. While the sky high inflation has caused pain at the pump, and misery at the market, there is one silver lining on the horizon. The Social Security cost-of-living adjustment (COLA) will be 8.7% in 2023! This year’s increase tops the 5.9% boost in benefits we received in 2022, which was at that time, the biggest increase in four decades.
COLA is an increase made to Social Security benefit payments in an effort to counteract inflation, or help seniors keep their standard of living intact as the costs of goods and services rise in the economy. The government calculates the Social Security COLA factor utilizing the Consumer Price Index for Urban Wage Earners and Clerical Workers, referred to as CPI-W. The COLA calculation compares the average CPI-W for the third quarter of the prior year, to the average CPI-W for the third quarter of the current year. The percentage increase in COLA, or the increased SSI benefits, are effective as of the beginning of December, which is paid out one month in arrears, or paid in January of the following year.[i]
It is estimated that the January 2023 COLA increase will amount to approximately $140 per month of additional benefits for average American households. That brings the average Social Security retiree benefit up from $1,681 in 2022, to $1,827 in 2023.[ii]
At the same time, Medicare Part B premiums are expected to decrease in 2023. Medicare Part B covers physician services and other outpatient hospital services. The standard monthly premium for Medicare Part B participants will be $164.90 in 2023, a decrease from $170.10 in 2022. While the decrease is small, the total picture of increased Social Security benefits payments coupled with decreased Medicare Part B premiums is a welcomed relief to many retirees who have struggled to make ends meet in our high inflationary environment.
2022 has been a tough year for many. Hopefully we will turn the corner in 2023. Wishing you all good health, a recovering stock market, and lower inflation in 2023!