Every fall, the Social Security Administration makes an announcement that has a major impact on the 66 million people who receive benefit checks. The annual inflation adjustment aims to prevent seniors from losing purchasing power.
The agency this year is expected to announce its 2023 cost of living adjustment, or COLA, on Thursday, October 13. The Social Security Administration is based on the rate of inflation in the third quarter, or July to September — with the government also releasing its September inflation report on October 13.
Based on inflation data so far, seniors are likely to receive a COLA of 8.7 percent, according to the Senior Citizens League, an advocacy group for older Americans. That would translate into an average monthly increase of $144.10, boosting the standard benefit from $1,658 to about $1,802 per month.
“This is the highest COLA since 1981,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League. “People will, in theory, see a nice increase in Social Security benefits this time around.”
However some elderly people they worry the 2023 increase may not cover the cost increase they’ve seen in all their expenses — spiraling inflation that a 2022 COLA has failed to keep up with. Seniors in 2022 got a 5.9% cost-of-living adjustment, but inflation has soared above that every month this year, hitting a high of 9.1% in June.
What is the cost of living adjustment?
In the 1970s, lawmakers enacted an automatic annual increase in benefits for Social Security recipients that boosts payments to keep up with inflation.
Before that, Congress had to approve increases to keep up with inflation, which meant that it would sometimes be several years before seniors got an increase in benefits.
What day will the 2023 COLA be announced?
Experts believe the Social Security Administration will announce its cost-of-living adjustment on October 13. That’s when 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 inflation affecting seniors?
Some advocates say it is 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 Office Workers, or CPI-W.
Some seniors and their advocates have argued that the CPI-W does not accurately reflect the price pressures older Americans face.
The CPI-W puts more weight on gas and transportation costs, which are expenses more common among commuter workers than among 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 period of high inflation.
That year, seniors got an 11.2% boost in benefits. There are only two other years that seniors received higher COLAs than projected for 2023: 1980, when benefits increased 14.3 percent. and 1979, when benefits increased by 9.9%.
There have also been several years when beneficiaries received no raise, such as 2009 and 2010, when the COLA was 0% due to flat inflation in the years following the financial crisis.
Will medical expenses affect the 2023 COLA?
There is some good news on that front.
Medicare, the health insurance program for older Americans, said last month drop his premiums next year by about 3% for Medicare Part B.
That’s important because Medicare Part B, which covers routine doctor visits and other outpatient care, increased its premiums in 2022 by 14.5%an increase that ate up much of the cost-of-living adjustment seniors received on their Social Security checks.
The standard Part B premium will be reduced by $5.20 per month, bringing the standard monthly premium to $164.90. About 85% to 90% of Americans in the government health insurance program pay the regular rate, with the premium deducted directly from their Social Security checks.
Another piece of good news is the insulin price cap for Medicare beneficiaries, which is driven by the Inflation Reduction Act. Starting in 2023, seniors on Medicare will pay no more than $35 a month for the drug.
However, one of the most important provisions of the law to reduce medical cost inflation — a cap of $2,000 per year out-of-pocket expense for drugs — won’t go into effect until 2025, meaning some seniors could face higher drug costs and out-of-pocket expenses in 2023.
What month will I get 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 actually go into effect with December 2022 benefits, those payments will be made in January 2023.
The January 2023 check will be sent based on your date of birth:
- If your birthday is between the 1st and 10th of the month, your payments arrive on the second Wednesday of the month. This means the first COLA 2023 check will be on January 11th.
- If your birthday falls between the 11th and 20th, your payments are made on the third Wednesday of each month. Your first 2023 COLA will arrive with your January 18th benefit.
- If your birthday is between the 21st and 31st, your payments are scheduled for the fourth Wednesday of each month. Your first 2023 COLA will arrive with your check on January 25th.