Social Security took center stage last week when the retirement program announced that beginning in 2023, beneficiaries will see their biggest payment increase in 41 years.
For that, they can thank an 8.7% cost-of-living adjustment designed to help seniors and other beneficiaries deal with a soaring inflation rate that is also the highest in 41 years. Here’s a roundup of the latest announcements and other information you should know.
COLA Gets a Big Bump
The Social Security Administration’s Oct. 13 announcement that next year’s COLA will rise 8.7% from 2022 was in line with most projections. For months, experts speculated that the 2023 increase would be above 8% — mainly because the inflation rate has consistently been 8% or higher.
On average, Social Security benefits will increase by more than $140 a month in 2023, the SSA said. The 8.7% COLA is the biggest annual increase since the 11.2% adjustment in 1981.
When Will My Increase Begin?
For anyone receiving Social Security benefits, the new payment amount will start in January 2023, according to the SSA. For those receiving Supplemental Security Income, the new payment amounts will begin Dec. 30, 2022. Beneficiaries who receive both types will see their payments follow the same schedule, with the SSI increase arriving shortly before the Social Security increase.
How To Find Out How Much More Money You’re Getting
The SSA said it will mail COLA notices throughout the month of December to retirement, survivors and disability beneficiaries, along with SSI recipients and representative payees. These notices will let you know how much your new payment will be.
If you want to find out about your new benefit amount sooner, you can get your Social Security COLA notice online using the Message Center in your personal my Social Security account. The online information will be available in early December, prior to receiving the mailed notice. Benefit amounts will not be available before then.
How To Find Your 2023 COLA Notice Online
If you haven’t set up a my Social Security account, you’ll need to create one by Nov. 15 to receive your COLA notice online. With the SSA’s new beta website, you can sign in or create an account by clicking “sign in” in the top right corner. The sign-in button is blue and in the center of the screen.
Once you log into your personal account, check the Message Center in early December to find your 2023 COLA notice. You also can use the Message Center to opt out of receiving mailed notices and set your preferences to receive text or email alerts when there is a new message waiting.
For security purposes, you should always access the Social Security website directly through your browser by entering the address. To avoid scams, don’t click any third-party links through emails.
For Some Seniors, the 2023 COLA Still Might Be Enough
The 2023 COLA will give seniors an average added benefit of $144 for individuals and $240 for couples filing jointly. Even though that’s the highest increase in more than four decades, some senior advocates say it might not be enough for beneficiaries already struggling to keep up with inflation.
For example, the latest Consumer Price Index data shows that food prices have risen 11.4% over the previous year. Gasoline prices are up 18.2% over the same period, heating oil is up 58.1%, natural gas has risen 33.1% and electricity is up 15.5%. Given these increases, a COLA of 8.7% still lags well behind. The wild card is when (and whether) prices will finally start coming down.
The COLA Will Have Tax Implications for Some Seniors
In some cases, the 8.7% increase in monthly Social Security payments will push seniors into income ranges where Social Security benefits become taxable. The federal tax code requires Social Security taxpayers to calculate their “combined income,” which is defined as their adjusted gross income, tax-exempt interest income and half of their Social Security benefits.
Those who earn a combined income of less than $25,000 a year for single filers or $32,000 for joint filers pay no tax on their Social Security benefits. Taxpayers earning between those thresholds and up to $34,000 for single filers or $44,000 for joint filers pay tax on up to 50% of their benefits. Above those levels, up to 85% of Social Security benefits are taxed.
Because of the high COLA in 2023, many Social Security beneficiaries who don’t pay income taxes now might be pushed into income levels where they are taxed. Others might face higher tax rates.
How To Balance Your New COLA Benefit With Other Income Sources
Many Social Security recipients need the 8.7% COLA just to pay the bills, while others with more wealth built up can simply put it toward savings or discretionary spending. In either case, it’s important to balance your new COLA benefit with other income sources, experts say.
Regardless of the size of your Social Security increase in 2023, the monthly payment is not intended to be the sole source of income in retirement. It should be complemented with other sources such as retirement accounts, regular savings accounts and other investments. Aim for a mix of income sources, and if you are still investing — keep your portfolio balanced between stocks, bonds and funds so that all your eggs are not in one basket.
If you want to develop new income streams to add to your Social Security payment, there are quite a few options. These include not only investing, but also finding side gigs that can bring in more money.
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