Increase to Social Security Benefits Is Coming: What It Means for You
A big benefit is set to come to Social Security recipients next year. According to AARP, the cost-of-living adjustment (COLA) is set at 8.7% for 2023, a significant jump over the 1.3% COLA in 2021 and even the 5.9% COLA in 2022. In fact, 2023’s COLA increase is the largest in over 40 years (in 1981 the COLA was 11.2%.)
While it is common for Social Security recipients to receive a COLA every year, there have been only five times since 1975 that the COLA has exceeded 7%. The increase of 8.7% means the average Social Security recipient will see about $140 extra per check.
Why the Large Increase in COLA?
It may seem at first that this COLA increase is the result of some extraordinary measure taken by the government. Is this the case?
As the name implies, the cost-of-living adjustment is designed to help Social Security recipients keep up with the rising prices of necessities and goods. If Social Security recipients received a flat benefit amount every year, their ability to meet their living expenses would be adversely affected.
The COLA that recipients get depends on the Consumer Price Index (CPI). This index measures the change in the cost of various goods and services from the third quarter of one year to the third quarter of the subsequent year. For July, August, and September of 2022, the CPI has remained above eight percent.
This COLA increase is certainly impressive and historic. However, it is more a reflection of the nation’s current economic situation than the result of any unusual action by the federal government.
When Social Security Recipients Will See the Increase
Although the increase in benefits was recently announced, it will be a few more months before recipients see a change in their monthly benefits. The COLA goes into effect for December’s benefits, and December’s benefits are paid out in January’s check. Thus, recipients can expect to see an increase beginning with their January 2023 check.
Cost-of-living adjustments are not backdated or made effective retroactively. Thus, even though the COLA increase has already been approved, recipients will not receive any increase in benefits for the months between now and December 2022.
Can Recipients Expect a Similar Increase Next Year?
Because of how the COLA is calculated every year, it is too early to tell whether a similar COLA increase will happen in 2024. If inflation remains high into next year and the cost of goods continues to increase, there is a strong likelihood that there will be a significant COLA increase.
For example, in 1979 the COLA increase was 9.9%. In 1980 it was 14.3%, and in 1981 it was 11.2%. The COLA adjustment did not fall back below five percent until 1983. So there is certainly historical precedent for recipients receiving significant COLA increases over several years.
Conversely, if federal authorities are able to get a handle on inflation and the cost of goods decreases over the next year, recipients should expect to see a smaller COLA increase for 2024.
The COLA Increase and Seniors’ Continuing Monetary Needs
Undoubtedly, one of the reasons why the COLA increase is so large this year is stubbornly high inflation. Simply put, the cost of goods has increased for all Americans, and the COLA increase for Social Security recipients is meant to reflect this reality.
There are questions, though, about whether this COLA increase is enough to enable senior citizens to live comfortably on their benefit checks alone. Some expenses, like housing and medications, may be higher for seniors and those with a disability than for members of the general public.
To combat this issue, some have introduced legislation that will tie future COLA increases to the CPI for the Elderly. This index may be a more accurate measure of the change in the cost of goods and services that senior citizens most often need.
Another legislative effort would ensure that the amount received by recipients would never fall below a certain amount above the poverty line.
Poverty is measured using a different metric than the CPI and also takes a person’s family size into account. Tying COLA increases to the poverty line might help ensure that recipients’ income never falls to such a level that recipients are unable to afford basic necessities.
Where to Look for Help with a Social Security Claim
If you have questions about your Social Security benefits or are not certain how to file for benefits, a qualified Social Security attorney can help clear up any confusion and point you in the right direction.
At SocialSecurityDisability.com, we can help match you with a licensed and experienced attorney who can address your concerns. Start a free claim evaluation by visiting our website or calling us at (833) 613-0618.