Many employees are used to getting a raise at the start of a new year. And Social Security seniors often have the same experience.
Each year, Social Security benefits are subject to cost-of-living adjustments, or COLAs, that aim to ensure benefits can keep pace with inflation. Many seniors receive their retirement income entirely or largely solely from Social Security. So in order for those seniors to maintain their standard of living as costs rise, they need an increase in their benefits.
In 2022, Social Security benefits received a COLA of 5.9% due to high inflation. At the time, it was hailed as the most generous raise in decades.
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But the COLA of 2023 will far exceed that of 2022. So you may qualify for a nice increase in your monthly Social Security wages.
Your monthly income can increase considerably
In 2023, Social Security benefits will be eligible for an 8.7% COLA. That brings the average monthly benefit of $1,681 all the way up to $1,827. And if you want to know how much higher your first Social Security check will be in 2023, just apply that 8.7% increase.
In most years, simply applying a COLA to your current benefit isn’t enough to determine how much your payments will grow. That’s because Medicare Part B hikes often eat up COLAs, giving seniors on both Social Security and Medicare less of a pay raise to look forward to.
But in 2023, Medicare Part B costs will drop for the first time in years. So Social Security recipients don’t have to worry about higher Medicare costs eroding the increase they’re looking forward to.
How far does your increased benefit actually extend?
A higher monthly Social Security salary can mean a lot to you financially. But whether you will actually gain purchasing power as a result of next year’s increase will largely depend on how inflation develops.
The whole reason the 2023 COLA is so generous is that inflation was high this year. As inflation begins to cool, seniors on Social Security can get ahead financially. But if inflation picks up again, the opposite could happen: beneficiaries could lose purchasing power, despite a very nice increase.
That’s basically what happened in 2022. Although benefits were increased by 5.9% at the beginning of the year, the pace of inflation made that 5.9% COLA somewhat useless. So the hope is that seniors on Social Security won’t get a repeat in 2023.
Make the most of that higher Social Security check
Regardless of how inflation develops, your monthly Social Security benefit will eventually increase significantly in 2023. And that’s something you should do your best to take advantage of – ideally by putting some of that extra money into savings so you have a cushion in case the cost of living rises even further.
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