Social Security recipients are poised to see the biggest cost-of-living adjustment in four decades next year, but exactly how much more money retirees actually see could vary.
The Social Security Administration (SSA) announced earlier this month that benefits are set to rise by 8.7% in 2023, the biggest bump since 1981, when recipients saw an 11.2% jump. It will increase the average monthly benefit by about $146 to $1,827 in 2023 from $1,681 in 2022.
More than 64 million Americans collecting Social Security will receive the bigger payments beginning in January, the administration said.
In December, the SSA will provide notices through the mail and online that include your new monthly benefit for next year. However, you can check sooner to view your COLA notice online by creating a My Social Security account no later than Nov. 15.
The account will show your current or expected future benefits based on your retirement age and work history.
You can also calculate the payment increase yourself: To do so, simply multiply your current benefit amount by 0.087 to determine how much your monthly payment could increase. For instance, if you receive an average monthly payment of $1,567, you would multiply that by 0.087 to determine that your checks will increase by about $136 per month next year.
The higher payments come in response to the hottest inflation in four decades: Prices paid by U.S. consumers surged 8.2% in September from the previous year, the Labor Department reported, despite an aggressive campaign by the Federal Reserve to cool inflation.
In this photo illustration, a Social Security card sits alongside checks from the U.S. Treasury on Oct. 14, 2021, in Washington, D.C. (Photo illustration by Kevin Dietsch/Getty Images)
The annual Social Security change is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, which jumped 8.5% over the past year.
"A Social Security cost-of-living-adjustment of 8.7% is rare — enjoy it now," said Mary Johnson, a policy analyst at the Senior Citizens League. "This may be the first and possibly the last time that beneficiaries today receive a COLA this high."
Still, the decades-high benefit increase is not always good news for recipients, according to Johnson. Higher Social Security payments are a bit of a Catch-22. They can reduce eligibility for low-income safety net programs like food stamps and can push people into higher tax brackets. More significant payments, essentially, do not necessarily result in more money in people's pockets.
The average monthly benefit would have to increase by $417.60 for retirees to maintain the same level of purchasing power as in 2000.