Social Security is likely to see the largest benefit increase since 1981. Here’s where you get it.

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Every fall, the Social Security Administration issues an announcement that has a big impact on the 66 million people who receive benefit checks. The annual inflation adjustment is intended to prevent seniors from losing purchasing power.

The agency this year is expected to announce its 2023 cost of living adjustment, or COLA, on Thursday, October 13. Social Security Administration bases its COLA on the inflation rate in the third quarter, or July through September — when the government also releases its September inflation report on October 13.

Based on inflation data so far, seniors are likely to receive an 8.7% COLA, according to the Senior Citizens League, an advocacy group for older Americans. That would translate into an average monthly increase of $144.10, increasing the typical benefit from $1,658 to about $1,802 per month. month.

“It’s going to the highest COLA since 1981,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League. “People will theoretically see a nice bump in their Social Security benefits this time around.”

Yet some older ones are concerned the 2023 increase may not cover the increase in costs they’ve seen in all their spending — an inflationary spiral that a 2022 COLA has been unable to keep up with. Seniors in 2022 received a cost-of-living adjustment of 5.9%, but inflation has risen above that every month this year, peaking at 9.1% in June.

What is the cost of living adjustment?

In the 1970s, lawmakers instituted an automatic annual increase in benefits for Social Security recipients that increases payments to keep pace with inflation.

Previously, Congress had to approve increases to keep pace with inflation, which meant that sometimes several years would pass before seniors got a daily allowance increase.

What day will the COLA be announced for 2023?

Experts believe the Social Security Administration will announce the cost-of-living adjustment on October 13. That’s when the agency released its 2022 COLA announcement last year, and on the same day the government will release inflation data for September.

Does the COLA accurately reflect the inflation affecting seniors?

Some advocates say it’s falling behind, in part because the formula used by the Social Security Administration relies on an inflation measure called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.

Some seniors and their advocates have argued that the CPI-W does not accurately reflect the price pressures older Americans face.

The CPI-W gives more weight to gas and transportation costs, which are expenses more common among workers who commute than retirees. It also places less emphasis on medical costs, which are typically higher for older Americans.

How will this year’s COLA compare to previous years?

It is likely to be the largest since 1981, which is when the US experienced another round of high inflation.

That year, the seniors received an 11.2% benefit boost. There are only two other years in which seniors received COLAs greater than expected for 2023: 1980, when benefits increased 14.3%; and 1979, when benefits increased by 9.9%.

There have also been several years in which recipients received no bump at all, such as in 2009 and 2010, when the COLA was 0% due to flat inflation in the post-financial crisis years.

Will medical costs eat into the 2023 COLA?

There is some good news on this front.

Medicare, the health insurance plan for older Americans, said last month it would drop his premiums next year by about 3% for its Medicare Part B plan.

That’s important because Medicare’s Part B plan, which covers routine doctor visits and other outpatient care, increased its premiums in 2022 by 14.5%an increase that ate up much of the cost-of-living adjustment seniors received in their Social Security checks.

The typical Part B premium will decrease by $5.20 per month, reducing the standard monthly premium to $164.90. About 85% to 90% of Americans on the public health insurance program pay the standard rate, with the premium deducted directly from their Social Security checks.

Another piece of good news is the insulin price cap for Medicare beneficiaries, which is governed by the Inflation Reduction Act. Starting in 2023, seniors on Medicare will pay no more than $35 per month for the medicine.

But one of the Inflation Reduction Act’s most impactful provisions for medical costs—a cap of $2,000 per year per expenditure on drugs — won’t go into effect until 2025, meaning some seniors could still face higher drug costs and out-of-pocket expenses in 2023.

What month will I get the COLA increase?

Although the Social Security Administration will announce the adjustment this week, seniors and others on the program will have to wait until January to receive their higher payments.

While the COLA actually goes into effect with December 2022 benefits, those payments will be made in January 2023.

Your January 2023 check will be sent based on your date of birth:

  • If your birthday falls on the 1st to 10th of the month, your payments will arrive on the second Wednesday of the month. This means that the first check with the 2023 COLA lands on January 11th.
  • If your birthday falls on the 11th to the 20th, your payments will arrive on the third Wednesday of each month. Your first 2023 COLA comes with your benefit on January 18th.
  • If your birthday falls between the 21st and 31st, your payments are scheduled for the fourth Wednesday of each month. Your first 2023 COLA will arrive with your check on January 25th.

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