2023 Social Security Increase
On October 13, 2022, the Social Security Administration announced that Social Security recipients will receive an annual cost of living adjustment (COLA) of 8.7% next year. This will be the largest increase since 1981, and follows the adjustment increase for 2022, which was 5.9%. Both of these recent percentage increases were aimed at helping approximately 70 million Social Security recipients that are plagued with higher inflation in the US. But it is too early to tell if the COLA will be enough to ward off higher costs. The inflation metric for August to October is at a 40 year high. Also on October 13th, the Bureau of Labor Statistics announced the consumer price index increased to 8.2%, rising faster than expected.
Senior citizens will also see their Medicare part B premiums decrease in 2023. The Center of Medicare and Medicaid Services announced last month that this will be the first time in more than a decade that the amount will be lower than the previous year. It is the fourth time premiums declined since Medicare was created in 1965. This decrease comes after a spike in the 2022 premiums, which raised the standard monthly premium to $170.10, up from $148.50 in 2021.
Many senior citizens rely on their Social Security payments to pay their essential cost of living each month. According to the Social Security Administration, for 42% of elderly women and 37% of elderly men, Social Security is at least half of their monthly income. In some cases, the increase could bump recipients into higher tax brackets, meaning more of their benefits will be taxed, or could deem them ineligible for certain government benefits because their income is now too high.
Also, record high increases could cause havoc with Social Security in future years. The Social Security Board of Trustees recently announced that trust funds, at the current levels, can pay full benefits through 2035. But, if benefits continue to rise, this could affect the ability to pay in the future. At that time, it is predicted by the board that the program will be able to pay only 80% of benefits.
To offset some of the increase, maximum earnings subject to the Social Security payroll tax will increase to $160,200, up from the $147,000 maximum for 2022, contributing more payroll tax into the program.
As always, Ciccarelli Advisory Services is here to help you with the complexities of Social Security. If you have any questions about the benefit increases and how it may affect your situation, please reach out to your advisor. Stay safe and stay informed.