Social Security Increase – Inflation’s Silver Lining?

By Amber Shrosbree, CFP®

If you’re one of the 66 million Americans receiving income from Social Security, look for an increase in your benefit starting in 2023. 

The Social Security Administration has announced a seemingly impressive 8.7% Cost of Living Adjustment (COLA), effective December 30, 2022.  On average the adjustment will add over $140 per month, but you can calculate your own increase by multiplying your current net benefit by 8.7% (or ask one of us at Eclectic to crunch the numbers).

Hard copy notices regarding the adjustment are being mailed out throughout the month of December.  You can always log into your Social Security account or create an account at ssa.gov to retrieve the latest statement and other information regarding your benefit at any time.  A notice regarding the COLA adjustment should be posted there by November 15th. 

If you are wondering why Social Security is being so generous, look no further than the current 8.2% US inflation rate (which is actually down a bit since the 9.1% rate we saw back in June).  That means in real terms – after factoring in inflation - the benefit increase is roughly only 0.5%.  However, finding anything these days that’s even keeping up with inflation is a difficult task, so the Social Security increase is a welcome change.

In years past, Social Security COLA increases have often been matched or even overtaken by similar Medicare cost increases.  We’re happy to report that the basic Medicare part B costs will actually decrease slightly in 2023, with a $5.20 decrease in the standard monthly premium and a $7 decrease from the annual deductible.

There continue to be Medicare income-related adjustments for those who are considered high income earners in retirement, but those amounts are also dropping slightly at each level.  We take those potential cost increases into consideration when we’re doing tax planning and reviewing returns for clients, so if you haven’t already sent us your 2021 tax return, please go ahead and do that.

For those clients who haven’t started Social Security benefits yet, we suggest that you also send us a copy of your latest Social Security statement.  We can do a lot of valuable planning with this information, including considering when to begin taking benefits and how updated benefit values affect your overall retirement income stream.

If you have any questions regarding your Social Security or how this may affect you, schedule a 15-minute discovery call with a fee-only financial advisor.