The Social Security Administration announced an 8.7% cost-of-living adjustment (COLA) for 2023.
This is the largest increase in four decades. Last year's 5.9% increase had been the highest in 39 years.
This COLA increase follows a 1.3% increase for 2021, 1.6% increase for 2020, a 2.8% increase for 2019, and a 2% increase for 2018.
The 8.7% raise applies to everyone who receives Social Security benefits, including Social Security retirement, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI) benefits.
How Much Will Your Social Security Check Increase?
The average Social Security check for disabled workers was $1,358 a month in 2022. Next year's increase will raise the average monthly payment by $118 to $1,476.
For people receiving SSI, the maximum federal payment will grow with the adjustment from $841 per month in 2022 to $914 per month in 2023.
To determine your new benefit check amount, take your 2022 monthly benefit and multiply that times 1.087. This will give you an estimate of your check amount for 2023.
You should receive a notification from Social Security indicating your new benefit amount in early December.
Most recipients can also view their COLA notice online through their My Social Security account.
How is Social Security COLA calculated?
The yearly COLA amount is based on increases in the Consumer Price Index (CPI) which measures the cost of inflation for goods and services, but not health care.
Most people receiving Social Security are retired or disabled. For most, health care is their biggest expense, and it is one of the fastest-rising costs in America.
Premiums for Medicare Part B are automatically deducted from the checks of many Social Security recipients. Medicare Part B premiums will decrease by $5 per month for 2023.
Some are proposing that Social Security begin using a price index for the elderly, called CPI-E, that would take into account items such as health care costs, which have increased at a greater rate than inflation overall.
Healthcare cost increases have outpaced COLA increases for years. Medicare Part B premiums are going up three times faster than the annual benefit increases. In addition, the CPI also does not take into account the rising cost of prescription drugs.
But so far, no action has been taken on this proposal.
Changing to the CPI-E is included in the Social Security 2100 Act aimed at fixing Social Security put forward by Rep. John Larson, D-Conn.
As of March, inflation has caused Social Security payments to lose 40% of their buying power since 2000, according to a study released earlier this year by The Senior Citizens League. Monthly benefits would have to increase by $540 to maintain the same level of buying power as in 2000.
When will Social Security checks increase?
Increases will go into effect on December 31, 2022, and will be seen by SSDI recipients on the first check of January 2023.