Social Security checks will be 8.7% bigger in 2023, the largest cost-of-living adjustment to benefits in four decades, the Social Security Administration said Thursday.
The extra funds will provide relief for many of the roughly 70 million Social Security recipients whose budgets have been stretched thin by high inflation and whose nest eggs were walloped by plunging stock and bond markets. The average monthly Social Security check for retired workers will rise to $1,814 in January, up from $1,669 this year.
For the government, this supersize cost-of-living adjustment, or COLA, means paying out more money to retirees, whose ranks are swelling as baby boomers retire. For retirees, however, the COLA will “be a welcome relief to people when they get it this January,” said David Certner, legislative counsel at AARP.
The cost-of-living adjustment is intended to ensure benefits keep pace with inflation. The annual increase is tied to the average inflation for July, August and September, using the Labor Department’s consumer-price index for urban wage earners and clerical workers. The broader consumer-price index rose 8.2% in September from a year earlier.
The Social Security Administration also said the maximum amount of earnings subject to the Social Security tax will increase to $160,200 in 2023, from $147,000 this year.
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Next year’s increase will be the largest since 1981, when benefits rose 11.2%, according to Social Security Administration data. The highest COLA since the program began automatic cost-of-living increases in 1975 was 14.3% in 1980.
Just over 40% of Americans age 65 and older rely on Social Security for half or more of their income, according to an AARP analysis of recent government data. About 20% of recipients in that age group depend on the benefits for 90% or more of their income, the analysis found.
Mr. Certner said soaring inflation has been hard for many retirees to manage. While Social Security benefits rose 5.9% this year, that hasn’t fully kept pace with inflation. Most private-sector pensions don’t have a cost-of-living adjustment, he said, and most other sources of retirement income, such as 401(k) and individual retirement accounts, have declined this year with the markets.
Retirees also got hit this year with a 14.5% increase to $170.10 a month in Medicare premiums for Part B, which covers outpatient care and is typically deducted from Social Security checks. Next year, Medicare Part B premiums will decline by $5.20 to $164.90 a month, due in part to lower-than-expected Medicare spending for Alzheimer’s disease drug Aduhelm.
Like most retirees, Bill Waldie, 71, of Iowa City, has his Medicare premiums deducted from Social Security. When inflation was low, the increase in the annual premium often consumed much of his Social Security cost-of-living increase.
*Article from wsj.com
*Written by Anne Tergesen
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