Social Security Benefits for 2023: Why Americans Could See an 8% Increase
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As the cost of living continues to rise, the Social Security Administration (SSA) conducted its annual analysis and reported that we could see an increase of up to 8% in SSA benefits for 2023.
While the final numbers won’t be released until October 2022 or take effect until January 2023, here is a breakdown of what this increase could mean for Americans.
What’s Causing This Increase?
Several factors contribute to changes in the SSA annual rate.
Cost of Living Adjustments
The annual social security benefit rate is determined primarily by the way cost-of-living adjustments are calculated. Living costs have risen across the board over the last several years due to pandemic-related turmoil, as well as inflation.
Consumer Price Index Changes
One component that goes into how cost of living adjustments are measured is the Consumer Price Index or CPI. The CPI is an index of the variation in prices typical consumers pay for retail goods and other items.
The CPI rose 7% from December 2020 to December 2021 and is projected to increase 8.5% in 2022.
These changes heavily impact SSA benefits, as they show how much the cost of living has increased.
Impact on SSA
In 2021, SSA benefits rose 5.9% for an average monthly benefit of $1,658. The current average monthly benefit in 2022 sits at $1,790 and is projected to rise to $1,933 in 2023.
How Would an Increase Impact Me?
The extent to which this increase in monthly benefits could affect individuals buying power in 2023 is heavily dependent on two other factors: Medicare Part B Premiums and inflation.
Medicare Part B Premium
Medicare Part B is medical insurance that is paid for using SSA benefits. While the Medicare Part B monthly premiums for 2023 have not been determined yet, premiums increased 14.5% for 2022, taking a significantly larger portion of SSA benefits than in previous years.
It’s important to note that even if SSA benefits see an 8% increase, these other expense amounts will likely increase as well.
Accounting for Inflation
Inflation is causing everyday expense increases across the board, including things like rent, gas, groceries, medical treatment, and more.
With the cost of living continuing to rise, an 8% increase in SSA benefits may have little to no impact at all on everyday life, as the benefits get canceled out by other expenses.
Should I Adjust My Retirement Planning?
Have questions about how this potential change could affect your unique financial future? Our financial planning experts are here to help. Contact Us.