Social Security beneficiaries will receive an 8.7% cost-of-living adjustment (COLA) in January — one of the highest in the history of the program. The COLA, which is intended to protect the buying power of Social Security benefits when prices rise, comes after a second year of historically high inflation has left millions of older and disabled adults cutting back on meals, dipping deeply into emergency savings and often dealing with deep anxiety over how the bills would be paid.
According to TSCL’s latest Retirement Survey results, 80% of survey participants report that their standard of living has worsened since the start of the COVID-19 pandemic in 2020. Those who have savings say they have drawn down savings more rapidly than planned, and those who have no saving report they have taken on debt and/or have turned to low-income assistance programs such as SNAP and Medicare Savings Programs.
While the exact amount that individuals receive will vary, an 8.7% COLA will raise an average retiree benefit of about $1670 by $145.30 to $1,815.30 prior to the deduction of Part B premiums. The Social Security Administration notifies beneficiaries the last week of December, or early January with a “Your New Benefit Amount” notice which shows the amount of the COLA the recipient can expect, minus deductions for Medicare premiums and tax withholdings. (You can roughly figure the amount you are likely to get by multiplying their gross Social Security benefit received in 2022, the amount received prior to deductions for Medicare premiums and taxes, by 8.7%.)
In addition, to the record setting increase in Social Security benefits, Medicare Part B premiums won’t increase in 2023, but will go down by $5.20 per month from $170.10 in 2022 to $164.90 in 2023. That means virtually most or even all of the 2023 COLA boost can be used for other needs such as; winter heating bills, restocking the pantry, or paying down balances on credit cards.
The lower premiums are due to a reassessment of the Part B premium earlier this year. The Centers for Medicare and Medicaid Services (CMS) recently said that Part B premium charges in 2022 were significantly higher than needed and the excess amount accumulated in Part B contingency funds were used to reduce the Part B premium in 2023.
While that news sounds hopeful, TSCL continues to watch for signs that inflation is slowing down. Prices right now are still high, especially when compared to a year ago. Older adults should continue to plan carefully including for the possibility that the COLA in 2023 and the COLA this year would make a portion of Social Security income taxable.
How has inflation affected you this year? Please let us know by taking TSCL’s 2022 Retirement Survey.