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Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 8.7% in 2023, the Social Security Administration announced on September 13. On average, Social Security benefits will increase by more than $140 per month starting in January.

The 8.7% cost-of-living adjustment (COLA) will begin with benefits payable to more than 65 million Social Security beneficiaries in January 2023. Increased payments to more than 7 million SSI beneficiaries will begin on December 30, 2022. (Note: some people receive both Social Security and SSI benefits.)

The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics.

“Medicare premiums are going down and Social Security benefits are going up in 2023, which will give seniors more peace of mind and breathing room. This year’s substantial Social Security cost-of-living adjustment is the first time in over a decade that Medicare premiums are not rising and shows that we can provide more support to older Americans who count on the benefits they have earned,” Acting Commissioner Kilolo Kijakazi said.

Some other adjustments that take effect in January of each year are based on the increase in average wages. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200 from $147,000.

Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. The fastest way to find out their new benefit amount is to access their personal "My Social Security" account to view the COLA notice online.

People can also opt to receive a text or email alert when there is a new message from Social Security — such as their COLA notice — waiting for them, rather than receiving a letter in the mail. People may create or access their My Social Security account online at http://www.ssa.gov/myaccount.

Information about Medicare changes for 2023 is available at http://www.medicare.gov. For Social Security beneficiaries enrolled in Medicare, their new higher 2023 benefit amount will be available in December through the mailed COLA notice and My Social Security's Message Center.

The Social Security Act provides for how the COLA is calculated. To read more, visit http://www.ssa.gov/cola.

Increase Raises Concerns

The Senior Citizens League, (TSCL) one of the largest senior organizations, expressed three main concerns about the increase in a press release issued the same day as the Social Security Administration's announcement.

"Rising Social Security income due to COLAs can impact Medicare costs down the road," stated TSCL. "Any increase in the income of a Medicare beneficiary — whether due to COLAs, earnings from jobs, retirement savings or pensions — could potentially affect what an individual pays in Medicare premiums if income is over certain thresholds. This premium surprise affects both those with the highest incomes, as well as those with the lowest, but, in different ways.

"Those who receive low-income assistance for healthcare costs can be subject to trims in the amount of assistance they receive through Medicare Savings programs or Medicare Extra Help, or Medicaid. Increased incomes due to the COLA can make older and disabled beneficiaries ineligible for the level of benefits they currently receive when their income exceeds the limits."

According to a recent TSCL survey, 38% of survey participants who received low-income assistance in 2021 said their benefits were reduced to a lower level of assistance in 2022 due to the 5.9% COLA received this year. In addition, 16% reported that because their income was right on the borderline, they lost access to one or more low-income programs altogether.

(The survey also found that 83% of all survey respondents support the enactment of legislation that would temporarily protect low-income Social Security recipients from losing their low-income assistance benefits due to the COLA received in 2023.)

Higher-income Medicare beneficiaries may pay more in Part B and Part D premiums if incomes are higher than $97,000 (individuals) or $194,000 (joint). A boost in income can push beneficiaries into higher premium brackets.

TSCL's other main concern was about taxes.

"Two important inflation-related factors affect what older (and disabled) taxpayers may pay in taxes," the TSCL stated. "Up to 85% of Social Security benefits can be taxable if “provisional” income is above $25,000 (single filers), or $32,000 (joint filers). Unlike the rest of the tax code, the income thresholds that subject Social Security benefits to taxation have never been adjusted for inflation since the tax became effective in 1984.

"Any increase in Social Security income due to COLAs, could mean a portion of, or a higher portion of Social Security benefits would be taxable if income exceeds the income thresholds. But the other factor — tax brackets, standard exemption, and the exemption for over 65 — are adjusted for inflation, and tax experts expect these to rise by a historically high amount next year. Rising tax brackets and the standard deduction could potentially offset much of the increase caused by higher income in 2022.

"Higher benefits could move the Social Security insolvency date forward. The increase in Social Security income provided by the 2023 COLAs would permanently lift anticipated lifetime Social Security benefits.

"While that’s great news for Social Security recipients in the short term, it also means that total benefit costs in future years will be significantly higher than previously anticipated. That could mean Social Security could become insolvent earlier than previously forecast."