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It’s official — starting January 2023, we’ll see the biggest Social Security increase in more than 40 years.
If you’re one of 66 million Americans who counts on a monthly security check, then the recent Social Security Administration announcement on Oct. 13, 2022, will bring relief. In the midst of inflation and rising costs, the government has decided to increase your monthly Social Security checks by 8.7% — the biggest percentage since 1981.
So how much money can people expect from their Social Security checks? Will you pay more taxes with this increase in Social Security benefits? Will Medicare costs affect your increase? When can you expect your Social Security checks to go up? We have the answers on the Social Security increase.
Why is there a Social Security benefits increase?
Every year the government calculates the cost of living to determine how much to increase Social Security benefits. According to the Consumer Price Index, the cost of living has gone up 9.1% from June 2021 to June 2022, then fell slightly to 8.6% in July and August 2022. (By comparison, the CPI only rose 1.4% between 2020 and 2021.)
Seniors haven’t been able to keep up with the rising cost of living, and according to the Senior Citizens League, they have lost 44% of their buying power in the past 22 years. Social Security tries to lessen the impact by raising benefit payouts.
As a result, the government is raising the Cost-of-Living Adjustment (COLA) from 5.9% in 2022 to 8.7% in 2023. We haven’t seen a rise like that since 1981 when the COLA was 11.2%.
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How much will Social Security benefits go up?
The COLA is rising 8.7% — a 2.8% larger increase from 2022. So how much more can you expect on your next Social Security check?
Since the average monthly Social Security check in 2022 is $1,656 (as of September 2022), checks would increase to $1,800.10 per month, an extra $144.10 per month.
To calculate how much you would get each month with an 8.7% increase, take the gross Social Security check amount and multiply it by 1.087. For instance, if you get a $1,200 Social Security benefit monthly, your new total would be $1,304.40.
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When will the 2023 Social Security increase happen?
In December 2021, benefits jumped 5.9%, and recipients saw the pay increase reflected starting with their January 2022 checks. This year, the same will happen. The COLA increase goes into effect with the December 2022 benefits, but those checks will get sent out in January 2023.
January 2023 checks are sent out on a schedule based on your birthday. Here’s when you can expect your check:
- Birthdays that fall from 1 -10 will get their Social Security increase on their Jan. 11 check
- Birthdays that fall from 11 – 20 will get their Social Security increase on their Jan. 18 check
- Birthdays that fall from 21 – 31 will get their Social Security increase on their Jan. 25 check
Will you have to pay more taxes on your Social Security checks?
Yes. If your annual income — which includes Social Security benefits — is over the annual income minimum, you’ll have to pay taxes. If you’re single and your income is over $25,000 or married and your income is over $32,000, your benefits will get taxed up to 50%. If you’re single and make over $34,000 or married and your income is over $44,000, then you’ll get taxed up to 85%.
Even with an increased cost of living, this threshold stays the same. So if you get more Social Security money in 2023, then there’s a higher chance your benefits will get taxed.
With the 5.9% COLA increase in 2021, over 59% of retirees surveyed by the Senior Citizens League believe that they’ll get hit with some hefty taxes.
Will Medicare costs reduce the 2023 Social Security increase?
Medicare costs will reduce your monthly Social Security check if you’re a senior. However, there’s good news. Costs won’t be nearly as bad as last year.
About 90% of Americans who get Medicare have the standard premium costs taken out of their Social Security Check. Most have the Medicare Part B Plan which covers doctor visits and outpatient care. Last year, premiums went up by 14.5%, which sucked $170.10 from Social Security checks. Starting in January, standard premium rates for Medicare’s Part B plan will drop 3%, shaving off $5.20 from the monthly deduction. This leaves people with the plan paying $164.90 per month in 2023.