Tom Margenau | Social Security and You: Social Security COLA for 2023 | Lifestyles


Every year in mid-October, the Bureau of Labor Statistics releases its much-anticipated report on changes (mostly increases) in the consumer price index over the past 12 months.

Why is this small, esoteric government report — actually called the Consumer Price Index for Urban Wages and Employees — so popular? Because it has been the report for the past 48 years that determines the cost of living adjustment (COLA) that Social Security beneficiaries will receive the following year.

Because my column has a long lead time, what I’m reporting here is not news to most of my readers. As you may have heard, checks from all 65 million Social Security beneficiaries will rise 8.7% in 2023.

And while this is the biggest increase in many decades, I’m always afraid to mention COLAs in this column because every time I do, I’m inundated with emails from readers complaining that the increase isn’t enough.

But here’s the problem: Many economists and social planners believe that Social Security COLAs are too generous! (I’ve explained why in previous columns, but don’t have the space today to get into that argument.) That’s why most discussions about long-term social security reforms include proposals to reduce the rise in the cost of living.

OK, back to the 2023 Social Security COLA. As a result of these increases, the average monthly retirement check will be $1,827 in 2023, an increase of $146 from the 2022 level.

The maximum Social Security check for an employee who reaches full retirement age in 2023 is $3,627, compared to $3,345 in 2022. Keep in mind that $3,627 is the maximum for someone who reaches full retirement age in 2023. That doesn’t mean it’s the maximum Security Payment anyone can receive.

There are millions of Social Security beneficiaries who get much more than that, mainly because they have worked well past their FRA and/or have deferred benefits until age 70.

Here’s another important point about the COLA. Many readers have asked me if they need to claim Social Security benefits in 2022 to get the COLA paid in January 2023. The answer is no.

The COLA will be built into the benefit calculation formula, so even if you don’t file for Social Security until next year or next year, you’ll still get the 8.7% increase.

While this is a Social Security column, I should mention the upcoming Medicare Part B premium cut, which is deducted from Social Security checks for most people. In 2023, the base premium for Part B will be $164.90. That’s $5.20 less than the 2021 rate. And as has been the case for 20 years, wealthy people pay more than the base premium.

I don’t want to get into this complicated issue of Medicare premiums, except to make this quick point. Though connected in the minds of most older adults, Social Security and Medicare are completely separate programs, administered by completely separate federal agencies, and they have completely separate rules and regulations regarding their benefit and payment structures. For example, I’ve already explained how Social Security COLAs are calculated. The Part B Medicare premium increase has nothing to do with the CPI. Instead, by law, it must be set at a level that covers 25% of the cost of running the program. Taxpayers collect the remaining 75%. (And again, rich people pay more than the 25% share.)

Another measure, called the “national wage index,” is used to determine increases for other provisions of the law that affect Social Security beneficiaries and taxpayers. This includes in particular increases in the amount of wages or income from self-employed persons subject to social security tax; the amount of income needed to earn a “quarter of coverage”; and Social Security income limits.

Social Security’s taxable income base will increase from $147,000 in 2022 to $160,200 in 2023. In other words, people who earn more than $160,200 in 2023 will no longer deduct Social Security taxes from their paychecks once they reach that threshold. This has always been a very controversial provision of the law. (Bill Gates pays the same amount of Social Security taxes as his plumber!) I think it’s a fair bet that any Social Security reform package, if any, will include an increase in that wage base.

Most people need 40 Social Security work credits (sometimes called “quarters of coverage”) to qualify for the system’s monthly benefit checks. In 2022, people who were employed earned one credit for every $1,510 in Social Security taxable income. However, no one earns more than four credits per year. In other words, once you earn $6,040, your Social Security record is credited with the maximum four credits or quarters of coverage. In 2023, the one credit limit will go up to $1,640, meaning you’ll need to earn $6,560 in the next year before you get the maximum four credits allotted to your Social Security account.

People under their full retirement age who receive a Social Security pension or survivor benefits, but who are still working, are subject to limits on how much money they can earn and still receive all of their Social Security checks. That limit was $19,560 in 2022 and will be $21,240 in 2023. For every $2 someone earns above those limits, $1 will be deducted from his or her monthly benefit.

There is a higher income threshold in the year a person reaches full retirement age, which applies from the beginning of the year until the month the person reaches FRA. (The income penalty disappears once someone reaches that magical age.) That threshold rises from $51,960 in 2022 to $56,520 in 2023.

A few other social security benefits are also affected by inflationary increases. For example, people who receive disability benefits who are trying to work can generally continue to receive that benefit as long as they do not work at a “substantial” level. In 2022, the law defined substantial work as any job that paid $1,350 or more per month. By 2023, that substantial income level will rise to $1,470 per month.

Finally, the federal basic payment level of supplemental security income for one person will increase from $841 in 2022 to $914 in 2023. SSI is a federal welfare program administered by the SSA, but it is not a Social Security benefit.

It is paid from general income, not Social Security taxes.

If you have a Social Security question, Tom Margenau has two books with all the answers. One is called “Social Security – Simple and Smart: 10 Easy-to-Understand Fact Sheets That Will Answer All Your Social Security Questions.” The other is “Social Security: 100 Myths and 100 Facts.” You can find the books on or other bookstores.

The Valley Voice
The Valley Voice
Christopher Brito is a social media producer and trending writer for The Valley Voice, with a focus on sports and stories related to race and culture.


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