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Social Security COLA for 2023
December 5, 2022
The Social Security Administration has announced an 8.7% benefit increase for 2023, based upon inflation for the twelve months ending September 30, 2022. It’s the biggest cost of living adjustment (COLA) since 1981. For the average worker, the increase comes to about $140 per month.
With the increase in average wages comes an increase in the wage base for those who are still working. It goes from $147,000 in 2022 to $160,200 in 2023.
Roughly 70 million Social Security beneficiaries will receive the increased benefit. The Social Security Administration did not project the total value of the COLA expense for 2023. A rough calculation would be $117.6 billion (70 million recipients x $140/month x 12 months). The increased expense will be offset by the additional 15.3% in Social Security taxes (employee plus employer share) on the $13,200 increase in the wage base (that comes to $2019.60 in tax revenue per affected taxpayer). Perhaps the Social Security tax revenue will also increase as workers obtain raises to keep up with inflation, and as labor force participation grows in the coming years.
In most years, the increase in Social Security benefits is offset by an increase in Medicare Part B premiums. That will not happen in 2023, according to a post from CMS.gov (Centers for Medicare and Medicaid Services). Inflation notwithstanding, the premiums and deductible for Medicare Part B are going down, not up, in 2023. Standard monthly premiums drop by $5.20, from $170.10 to $164.90, and the annual deductible falls from $233 to $226.
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