Every fall, the Social Security Administration issues a statement that significantly affects the 66 million beneficiaries. The annual inflation adjustment aims to prevent seniors’ purchasing power from declining.
On Thursday, October 13, the organisation is anticipated to reveal its cost-of-living adjustment, or COLA, for 2023. The government also released its September inflation data on October 13; the Social Security Administration bases its COLA on the third quarter’s inflation rate, or July through September.
The Senior Citizens League, an organisation that advocates for senior citizens in America, estimates that seniors will likely receive a COLA of 8.7% based on inflation data so far. This would result in a monthly gain of $144.10 on average, bringing the average benefit from $1,658 to roughly $1,802 on a monthly basis.
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According to Mary Johnson, a Social Security and Medicare policy researcher at The Senior Citizens League, that will be the greatest COLA since 1981. Theoretically, people will get a nice increase in their Social Security income this time.
However, some seniors are concerned that the 2023 raise might not be enough to offset the cost increases they have witnessed across the board due to soaring inflation that a 2022 COLA was unable to keep up with. The cost-of-living adjustment for seniors in 2022 was 5.9%, but inflation has gone over that each month this year, reaching a high of 9.1% in June.
What is the cost-of-living adjustment?
In order to keep up with inflation, lawmakers implemented an automatic annual benefit increase for Social Security recipients in the 1970s. Prior to that, Congress had to approve increases in order to keep up with inflation, which occasionally resulted in a delay of several years before seniors received an increase in benefits.
What day will the COLA be announced for 2023?
On October 13, according to experts, the Social Security Administration will announce the cost-of-living adjustment. On the same day that the government will release September inflation figures, the agency will release its 2022 COLA announcement.
Does the COLA accurately reflect the inflation that’s impacting seniors?
Some supporters claim that it is lagging behind in part because the Social Security Administration’s calculation uses the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, as a gauge of inflation.
The CPI-W, according to some seniors and their supporters, is an inaccurate reflection of the pricing pressures older Americans are subject to.
Gasoline and transportation expenses, which are more frequent among commuting workers than retirees, are given higher weight by the CPI-W. Additionally, it gives less importance to medical expenses, which are generally higher for elderly Americans.
How will this year’s COLA compare to prior years?
Since 1981, when the United States was going through yet another period of severe inflation, it is most likely to be the largest. The increase in benefits for seniors that year was 11.2%. Only two earlier years—1980 and 1979—saw pension increases for seniors greater than those anticipated for 2023. In 1980, benefits increased by 14.3% and 9.9%, respectively.
There have also been a number of years where beneficiaries received no increase at all, such as 2009 and 2010 when the COLA was 0% as a result of the post-financial crisis years’ flatlining inflation.
Will medical costs eat into the 2023 COLA?
Good news has been reported in this regard. Last month, Medicare, the health insurance programme for senior citizens, announced that the cost of its Medicare Part B plan would decrease by around 3% in 2019.
This is significant because Medicare’s Part B coverage, which covers common doctor visits and other outpatient care, increased its premiums by 14.5% in 2022. This rise consumed a significant portion of the cost-of-living adjustment seniors earned in their Social Security checks.
The usual monthly Part B premium will drop by $5.20 per month, bringing it down to $164.90. The regular rate is paid by 85% to 90% of Americans who are covered by the government’s health insurance programme, and the cost is withdrawn right from their Social Security benefits.
The insulin price cap for Medicare enrollees, which is mandated by the Inflation Reduction Act, is another encouraging development. Seniors on Medicare won’t have to spend more than $35 per month for the prescription beginning in 2023.
Some seniors may still experience increased prescription costs and out-of-pocket expenses in 2023 since one of the Inflation Reduction Act’s most significant measures for medical costs won’t take effect until 2025: a ceiling of $2,000 per year on out-of-pocket spending on drugs.
What month will I get the COLA increase?
The Social Security Administration will announce the change this week, but seniors and other programme participants won’t start receiving their higher benefits until January.
These payments will be made in January 2023 even though the COLA will actually take effect with the December 2022 benefits.
Based on your birthdate, a check will be mailed to you in January 2023:
- Your payments will be made on the second Wednesday of the month if your birthday is between January 1 and October 10. Therefore, the first check from the COLA for 2023 will arrive on January 11.
- Your payments are due on the third Wednesday of every month if your birthday is between November 11 and November 20. Your January 18 benefit will include your first 2023 COLA.
- Your payments are due on the fourth Wednesday of the month if your birthday is between January 21 and January 31. Your January 25 check will include your first 2023 COLA.
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