Social Security’s Latest Cost Of Living Adjustment (COLA) Projections
How Much Will The COLA Increase In 2023?
The Social Security Administration recently announced a cost of living adjustment (COLA) increase to Social Security benefits and Supplemental Security Income (SSI) payments for 2023. Approximately 70 million Americans will find an 8.7% increase in their payments beginning as early as December 30, 2022, as benefit payments are adjusted to meet the increased cost of living projections.
The 8.7% increase in benefits represents the largest COLA since 1981 and is one of the largest increases in the history of the Social Security Administration. The additional income will be a welcome benefit for the many seniors across the nation who rely on social security income and have been struggling to make ends meet on a fixed income while inflation and other increased costs have significantly increased the cost of day-to-day living.
Social Security and SSI beneficiaries will receive Cost Of Living Adjustment (COLA) notices through the mail and can also find the information online in their My Social Security account beginning in December. For most beneficiaries, the changes will start with the January 2023 distribution, although the increased benefits for more than 7 million SSI beneficiaries will begin on December 30, 2022.
How Will The Cost Of Living Adjustment Benefits Affect Workers?
As Social Security and SSI benefits increase to match the increased cost of living in 2023, workers may be wondering if the increase will affect their paychecks.
- The maximum amount of wages that will be subject to the Social Security tax is increased slightly to $160,200.
- The earning limit for workers under “full” retirement age will increase to $21,240.
- For every $2 in income earned beyond the $21,240 limit, $1 of benefits will be deducted.
- There is no earning limit for workers who are at or above “full” retirement age for the entire calendar year.
Will The Cost Of Living Increase Affect Medicare Benefits?
Information regarding changes to Medicare in 2023 is available at Medicare.gov. Social Security beneficiaries who receive Medicare can find their 2023 benefit amounts through a COLA notice that they will receive in the mail as well as in My Social Security’s online message center, beginning in December 2022.
How Are Cost Of Living Adjustments Calculated?
Each year, government officials examine the projected cost of living for the coming year to ensure that Social Security and SSI benefits maintain the same purchasing power under inflation. Cost of living adjustments (COLA) is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the last year where a COLA was determined until the third quarter of the current year.
If there is no increase in the cost of living, there will be no COLA adjustments to Social Security or SSI benefits for that calendar year.
History Of Automatic Cost Of Living Adjustments (COLA)
Initially in the Social Security program, benefits could only be increased when Congress enacted specific legislation to do so. In 1972, Congress approved the COLA provision, leading to automatic annual COLAs beginning in 1975. Similar legislation made the Consumer Price Index the official standard for Social Security COLAs.
These adjustments are a welcome change for most seniors because they mean that Social Security distributions will maintain their value, despite inflation.
Will The 2023 COLA Affect My Taxes?
Generally speaking, if Social Security is a person’s only source of income, they are unlikely to see any change in their taxes. If an individual draws on retirement savings or is employed in addition to collecting benefits, some of their Social Security income may be taxable. Additionally, taxpayers whose income is above the threshold amounts should anticipate an increase in their tax bill. However, it’s always recommended to discuss your income situation with a trusted tax professional for personalized information based on your situation.
What If I Am Still Struggling To Pay My Insurance Premiums?
The 2023 cost of living adjustment will be a welcome change for seniors and other Social Security beneficiaries who are struggling with inflation and increased cost of living. Workers who receive Social Security distributions may also appreciate the increased earning limits as they strive to make ends meet.
Unfortunately, the rising cost of living has left millions of Americans struggling to make their Medicare payments or life insurance premiums. Even with the significant COLA to their Social Security distributions, as inflation continues to rise, many seniors may still have difficulty paying their bills. If you’re wondering how to protect your health insurance policy or Medicare benefits or would like to learn about other insurance options that may be available to you, get in touch with the team at Phoenix Health Insurance. We are ready to help you find affordable, flexible insurance plans that meet your needs.