Will there be an increase in 2023 for Social Security?

Beginning in 2023, Social Security benefits could see the biggest increase in four decades, according to analysts.

The cost-of-living adjustment for Social Security was already a substantial 5.9% this year, or about $93 a month. By June, though, the US Bureau of Labor Statistics reported that the Consumer Price Index, the year-over-year change in prices Americans pay for goods and services, was at 9.1%.

It dipped to 8.5% in July and, according to the latest CPI figures, was only 8.3% for August. That's good news for the economy, but still marks 18 straight months that inflation far outpaced the 2% target set by the Federal Reserve.

The adjustment for 2023, which will be announced sometime in October, "will be one of the highest COLAs ever paid in the history of the program," Mary Johnson, a policy analyst at the nonprofit Senior Citizens League, told the Detroit Free Press.

For more on Social Security, learn when checks go out, how to access your benefits online and how benefits are calculated.

How much will Social Security benefits increase in 2023?

The Social Security Administration won't disclose the 2023 cost-of-living adjustment until October, but many experts expect an even larger increase than in 2022. 

Predictions have fluctuated greatly: In June, the nonpartisan Committee for a Responsible Federal Budget estimated Social Security benefits would increase as much as 10.8% to account for inflation, or almost $180 extra in monthly benefits. The following month, Marc Goldwein, the organization's senior policy director, tweeted that if inflation remained on its then-current trajectory, the increase would be 11.4% -- even higher than the record 11.2% increase in 1981.

Richard Johnson, director of the retirement policy program at the Urban Institute, told AARP on Aug. 10 that "somewhere in the 9% range is probably a reasonable guess."

A 9% cost-of-living adjustment to Social Security in 2023 would add about $150 to monthly checks, on average, or an additional $1,800 a year. And Munnell said it's "highly likely" that benefits would increase by more than that.

Last month, the Senior Citizens League foresaw a 9.6% COLA in 2023. With August's inflation data in, though, the organization has revised its prediction to a more conservative 8.7%.

The average Social Security benefit is $1,657 per month -- if the 8.7% bump is correct, that would work out to an increase of about $144 a month.

Separate from any COLA increase, a bill before Congress could see Social Security recipients getting an additional $2,400 a year in 2023. Introduced by Rep. Peter DeFazio and Sen. Bernie Sanders, the Social Security Expansion Act would add $200 to each monthly check for anyone currently receiving benefits or who will turn 62 next year.

The measure hasn't moved forward since it was introduced in June, however.

When will I know what my Social Security benefits are for 2023?

The Bureau of Labor Statistics is scheduled to announce inflation data for September on Oct. 13, and the Social Security Administration typically announces the cost-of-living adjustment issues soon after -- in some cases on the same day.

Beneficiaries should then receive letters detailing their specific benefit rate. If you miss this letter, you can still verify your increase online via the My Social Security website. The COLA goes into effect with December benefits, which appear in checks received in January 2023.  

When will I see the increase in my Social Security check?

Social Security payments are made on Wednesdays, following a rollout schedule based on the beneficiary's birth date: If you were born from the 1st through the 10th of the month, your benefits are paid on the second Wednesday of the month.

If your birthday falls between the 11th and 20th of the month, your checks are paid on the third Wednesday, and you'll see your first COLA increase on your Jan. 18 check.

Those born between the 21st and the end of the month receive benefits on the fourth Wednesday, which, in 2023, is Jan. 25.

How big will the Social Security Raise be in 2023? WASHINGTON, DC - MARCH 12: Former U.S. Vice ... [+] president Joe Biden speaks at the International Association of Fire Fighters legislative conference March 12, 2019 in Washington, DC. The conference addresses issues including firefighter mental health, funding the 9/11 Victims Compensation Fund and collective bargaining. (Photo by Win McNamee/Getty Images)

The pain of high inflation is often harshest on the fixed income budgets of current retirees. The only bright light of the relatively recent sky-high spike in inflation is the potential for a huge Social Security cost-of-living adjustment (COLA) in 2023. Estimates of the Social Security COLA in 2022 (for 2023) have been in the range of 8.6 to 10.5%. We have not seen a cost-of-living adjustment at this level since 2009.

The 2022 Social Security cost-of-living adjustment will not kick in until January 2023. So, retirees will likely continue to see their retirement incomes stretched thin over the next six months. The prices of everything you can't live without seems to be going up from, Mortgage rates or rent, food and even healthcare.

June 2022 Consumer Price Index And Social Security

The consumer price index (CPI) for June was just released; it showed prices rising by 9.1% over the past twelve months, without seasonal adjustments. This is the largest year-over-year increase since the inflation year ending in November 1981. Based on this CPI data, the Senior Citizens League has estimated the Social Security Cost-Of-Living Adjustment for 2023 could be a whopping 10.5% Which is substantially higher than last year's 5.9% Social Security COLA.

With an average Social Security benefit of $1688 per month, a 10.5% Social Security COLA for 2023 would translate into about $175 more per month in the pockets of the average Social Security recipient. Retirees receiving above-average Social Security retirement come would see even bigger increases in their monthly Social Security checks. This would be the biggest Social Security increase in benefits since 1981. Picture it: we are in the midst of the Cold War, fighting with Russia. Reagan is president, and "Physical" by Olivia Newton-John hits #1 on the Billboard Charts.

Also keep in mind, a large Social Security COLA for 2023 could increase the taxes you pay on your Social Security benefits.

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To be clear here, we are still just estimating where the Social Security COLA will be for 2023 based on current CPI data. If Fed is able to quickly bring down inflation numbers, we could see a smaller than expected Social Security COLA for 2023. Likewise, if inflation continues to run rampant, the COLA for Social Security could be even larger than predicted here. I don't know anyone who expected inflation to go away overnight. Optimistically it can start trending downwards, but I would be surprised if it didn't take quite some time to get it down to the Fed target of around 2% per year.

How is the Social Security COLA calculated each year?

How Is The Social Security COLA Calculated?

To calculate the actual Social Security COLA for 2023, the Social Security Administration (SSA) uses the average inflation in the third quarter, based on the CPI-W to calculate how much increase Social Security benefits for the following year. For reference, the 2022 Social Security COLA was 5.9%, which represented the largest Social Security Cost-Of-Living-Adjustment in nearly forty years.

Since a lot can change in a few months, if you are on a fixed income, I wouldn't rush out and make any large purchases that are dependent on a record Social Security COLA to be affordable. Sadly much of your increase in retirement income via the Social Security COLA for 2023 will be eaten up by spending on necessities like food, electricity and gas.

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