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Although prices are on the rise, thankfully there’s a Social Security increase coming — in fact, the biggest increase in more than 40 years.
If you’re someone who relies on the fixed income that comes from a monthly Social Security check, the latest announcement by the Social Security Administration will be really good news in the midst of record-breaking inflation.
So, how much money can people expect from their Social Security checks? Will you pay more taxes with this increase in Social Security benefits? 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 benefits. According to the Consumer Price Index, the cost of living has gone up 9.1% from June 2021 to June 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 Citizen 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.
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How much will Social Security benefits go up?
Although the Social Security Administration hasn’t officially announced how much they’ll raise benefits, policy experts predict a 10.5 – 10.8% increase in 2023. The average monthly Social Security check as of May 2022 is $1,668 (according to the AARP).
That means the average recipient would get an extra $175 per month, taking them up to $1,843 per month.
This would be the most significant increase since 1981, when Social Security recipients got an 11.2% bump in benefits. However, if prices continue to inflate in the next three months, we could set a new all-time record increase.
When will the 2023 Social Security increase happen?
In December 2021, benefits jumped 5.9%, and recipients saw the pay increase in their January 2022 checks. This year we expect a similar timeline with the new amount hitting benefit checks in January 2023.
You can expect to hear the official benefits increase announcement by October 2022.
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.