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 is aimed at keeping 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 bases its COLA on the inflation rate during the third quarter, or July through September — with the government also releasing its September inflation report on October 13.
Based on inflation data so far, it’s likely that seniors will receive a COLA of 8.7%, 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 typical benefit from $1,658 to about $1,802 per month.
“That is going to the the highest COLA since 1981,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League. “People will be seeing, theoretically, a nice bump in their Social Security benefits this time.”
Yet some seniors are worried the 2023 increase may not cover the rise is cost they’ve seen in all their expenses — spiraling inflation with which a 2022 COLA has failed to keep pace. Seniors in 2022 received a 5.9% cost-of-living adjustment, but inflation has soared above that every month this year, touching a high of 9.1% in June.
What is the cost-of-living adjustment?
In the 1970s, lawmakers put in place an automatic annual benefits increase for Social Security beneficiaries that boosts payments to keep up with inflation.
Prior to that, Congress had to authorize increases to keep up with inflation, which meant that sometimes several years would pass before seniors received a benefit increase.
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 2022 COLA announcement last year, and the same day the government will release inflation data for September.
Does the COLA accurately reflect the inflation that’s impacting seniors?
Some advocates say that it is falling behind, partly because the formula used by the Social Security Administration relies on an inflation measure called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
Some seniors and their advocates have argued that the CPI-W doesn’t accurately reflect the price pressures facing older Americans.
The CPI-W gives greater weight to gasoline and transportation costs, which are expenditures more common among workers who commute 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 prior years?
It’s likely to be the biggest since 1981, which is when the U.S. was experiencing another bout of high inflation.
That year, seniors got a benefit boost of 11.2%. There are only two other years when seniors received COLAs bigger than what is forecast for 2023: 1980, when benefits got a 14.3% hike; and 1979, when benefits rose by 9.9%.
There have also been several years when beneficiaries received no bump at all, such as in 2009 and 2010, when the COLA was 0% due to flatlining inflation during the post-financial crisis years.
Will medical costs eat into the 2023 COLA?
There’s some good news on this front.
Medicare, the health insurance plan for older Americans, last month said it would drop its premiums next year by about 3% for its Medicare Part B plan.
That’s important because Medicare’s Part B plan, which covers routine doctor visits and other outpatient care, boosted 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, trimming the standard monthly premium to $164.90. About 85% to 90% of Americans on 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 insulin price cap for Medicare beneficiaries, which is directed by the Inflation Reduction Act. Starting in 2023, seniors on Medicare won’t pay more than $35 a month for the medication.
However, one of the Inflation Reduction Act’s most impactful provisions for medical costs — a cap of $2,000 per year on out-of-pocket spending on drugs — won’t go into effect until 2025, which means some seniors could still face higher medication costs and out-of-pocket expenses in 2023.
What month will I get the COLA increase?
Even though the Social Security Administration will announce the adjustment this week, seniors and others on the program will have to wait until January to receive their higher payments.
While the COLA will actually go into effect with the December 2022 benefits, those payments will be made in January 2023.
Your January 2023 check will be sent based on your birth date:
- If your birthday falls on the 1st to 10th of the month, your payments arrive on the second Wednesday of the month. That means the first check with the 2023 COLA will land on January 11.
- If your birthday falls on the 11th to 20th, your payments come on the third Wednesday of each month. Your first 2023 COLA will arrive with your January 18 benefit.
- If your birthday falls on the 21st to 31st, your payments are scheduled for the fourth Wednesday of each month. Your first 2023 COLA will arrive with your January 25 check.
