Pamela Kweller RSSA Staff
The September 2022 Consumer Price Index (CPI) report was released today, providing the final calculation for the 2023 Social Security Cost of Living Adjustment (COLA). And the official 2023 Social Security COLA is a whopping 8.7 percent!
According to the Social Security Administration, “The 8.7 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 65 million Social Security beneficiaries in January 2023.”
The Social Security Administration calculates the COLA based on the increase in the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers) in the third quarter of the current year compared to the increase in the CPI-W in the third quarter of the previous year. The third quarter includes July, August, and September. The CPI-W is determined by the Bureau of Labor Statistics in the Department of Labor.
The CPI-W was 9.1 percent in July and 8.7 percent in August. And today the U.S. Bureau of Labor Statistics released a statement saying that the CPI-W was 8.5 percent in September, closing out the third quarter and providing the calculation for the 2023 COLA.
This past year’s COLA was 5.9 percent, which was the largest COLA in nearly 40 years. In 1983, a 7.4 percent COLA was applied to benefits. However, this year’s COLA at 8.7 percent is record breaking! However, COLAs are not guaranteed. There have been years with zero percent COLAs, most recently in 2016.
Martha Shedden, President and Co-Founder of NARSSA, says, “Retirees have something to celebrate again this year! For the average retiree, this COLA represents an increase of about $140 per month. An unprecedented decrease in the Medicare Part B premium this year will also provide a bit of welcome relief as benefits reflect these two historic changes for retirees.”
The average monthly Social Security benefit is currently $1,681. With an 8.7 percent increase, the average monthly Social Security benefit in 2023 will be $1,827.
The maximum monthly benefit for a worker filing at Full Retirement Age FRA is currently $3,345. With an 8.7 percent increase, the maximum monthly Social Security benefit for a worker filing at FRA in 2023 will be $3,627.
Other changes will also take effect. For example, the maximum amount of earnings subject to Social Security taxes will be increased in 2023 from $147,000 to $160,200.
Additionally, it will take more income to earn one quarter of coverage or credit. A minimum of forty credits are needed to qualify for Social Security. The amount of earnings required for one credit in 2022 is $1,510. With an 8.7 percent increase, the amount of earnings required for one credit in 2023 will be $1,640.
Stay tuned as we provide more updates on Social Security and the changes coming in 2023.
Photo credit: iStockphoto.com/designer491