Social Security Payments Increase in 2023: The Consequences of Receiving Higher COLA Next Year Might Upset You!

The largest payment boost for the program in decades was announced this week by the Social Security Administration.

Since 1975, the Social Security Administration (SSA) has implemented a cost-of-living adjustment (COLA) each year after examining inflation rates to determine how much to raise beneficiary payments to help beneficiaries keep up with the cost of goods.

When Will Increased Social Security Payments Start?

Taking into consideration the extreme rates of inflation that have been impacting Americans all year, the most recent COLA represents a record 8.7% increase. The last time Social Security experienced this type of growth was in 1981, when the SSA declared a COLA of 11.2%.

For the many seniors and other Social Security recipients-roughly 70 million people, according to the SSA-who have been struggling to make ends meet as prices continue to climb, the news of the 2023 payment boost is encouraging.

The cost of food has increased by 11.2% compared to this time last year, while utilities like electric and piped gas have increased by 19.8% and the price of housing has increased by 6.6%, according to the most recent Consumer Price Index data published on October 13.

Per Yahoo, the payment rise in 2023 will result in an average monthly benefit increase of $144 for individuals and $240 for couples filing jointly, or 8.7% higher. The type of payment received will determine the response to that question. The new payment level for anybody receiving Social Security benefits will begin in January 2023, according to the SSA.

The revised payment levels for recipients of Supplemental Security Income (SSI) will start on December 30, 2022. Some beneficiaries receive both forms of benefits, and they will also receive payments on these dates, with SSI payments increasing somewhat before Social Security payments do.

In addition to being a record increase, the COLA for 2023 is also noteworthy in that recipients will get the whole increase since Medicare Part B rates will be lower the following year. Previously, Medicare premium increases that cover doctor and outpatient hospital medical services would offset the COLA. In January 2023, Medicare premium reductions will also be implemented, as per AS via MSN.

Increased COLA in 2023

In 2023, an 8.7% increase may enable seniors to improve their financial situation. But is a COLA that huge really cause for celebration? Or will seniors face the same difficulties in the coming year as they did this year?

Per USA Today, there's a high probability Social Security recipients will actually have more buying power in 2023. However, it will only occur if inflation rates start to decline.

Because of inflation, Social Security beneficiaries will receive a significant rise in benefits next year. Additionally, seniors may experience their first increase in purchasing power based on their COLA in years if inflation levels decline in the coming year (which is possible in the aftermath of the Federal Reserve's aggressive interest rate rises).

But seniors won't fare any better if inflation begins to rise again. By 2023, they could possibly be in a worse situation. Just consider what occurred in 2022. Recipients of Social Security received a 5.9% COLA at the beginning of the year. Even while it is by far not the greatest COLA seniors have ever gotten, that boost was at the time touted as unprecedented.

But take a look at how the COLA fared throughout 2022. Social Security pensioners are in a tough situation as a result of the Consumer Price Index's (CPI) yearly increase rate, which has been significantly greater than 5.9%. Seniors could be in a great position in 2023 if the CPI keeps recording inflation readings under 8.7%. But we can't guarantee for sure that won't happen in the absence of a crystal ball.

All in all, the COLA for the next year is uneven. It's excellent that Social Security payments are increasing, but the rising cost of living is the primary driver of that significant increase. Let's hope that inflation stays low so that seniors may take full use of their 2023 COLA and possibly use the additional funds to stabilize their finances after a very challenging 2022.