Social Security is an essential source of income for millions of seniors. Now that we are in the last quarter of 2022, many people are eager to learn more about changes to the program that may be in store for 2023.
We’ll have to wait until October 13 to get some specific updates. But here are three pieces of positive news that we can point to already.
1. Next year’s increase should be huge
We won’t know what the 2023 cost of living adjustment (COLA) will look like until mid-October, as it relies on having a complete set of inflation data for the third quarter. But based on what we know so far, it’s fair to say that next year’s COLA will be the largest in decades.
In early 2022, benefits rose by 5.9% as a result of a rise in inflation. But this year’s inflation is much higher than last year’s – hence the much larger COLA.
Earlier in the year, some experts predicted an 11% increase in Social Security for seniors by 2023. That’s unlikely to happen. But is an increase close to 9% possible? Absolute.
2. Medicare Part B Premiums Won’t Eat Next Year’s COLA
Last year’s positive news of a 5.9% COLA was offset by the announcement that the standard Medicare Part B premium would increase from $148.50 in 2021 to $170.10 in 2022. Seniors participating in both programs have their Medicare Part B premiums deducted from their Social Security direct benefits.
But this year, seniors don’t have to worry about a repeat scenario. Medicare recently announced that the standard Part B premium will actually be lower in 2023 than in 2022 – $164.90. As such, it looks like seniors with Social Security will actually be allowed to keep their COLAs, rather than lose some of them to Medicare Part B costs.
3. The income test limit should increase
Social Security seniors can work and receive benefits at the same time. But they can also run into trouble once their income exceeds a certain threshold, because at that point there is the potential for some of their Social Security income to be withheld.
To be clear, this only applies to seniors who receive benefits and have not yet reached full retirement age. Once you reach full retirement age, income has no effect on benefits.
The cap on the income test, which determines how much seniors can earn before withholding benefits come into play, tends to increase from year to year to account for factors such as inflation and wage growth. Next year, seniors should have more leeway to earn money before their benefits are affected.
It’s good news everywhere
Many Social Security recipients have had a rough time this year in the wake of inflation, so the combination of a giant COLA without a Medicare Part B hike is certainly welcome news. While a higher income test limit may not affect as many seniors, it’s a good thing that it should be possible to earn more money without worrying at a time when the cost of living is skyrocketing.