Social Security Retirement and Supplemental Security Income (SSI) benefits will increase by 8.7 percent in 2023, the most significant increase since the 1980s. The last time the cost-of-living adjustment was higher was in 1981 when the increase was 11.2%. The increase, due to inflation, will result in a Social Security benefits increase of an extra $146 per month, or $1,827 for 2023, up from $1,681 in 2022.
SOCIAL SECURITY COLA AND MEDICARE: WHAT YOU NEED TO KNOW FOR 2023
SOCIAL SECURITY COLA AND MEDICARE: WHAT YOU NEED TO KNOW FOR 2023
Social Security benefits are adjusted yearly for inflation based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W index measures the monthly price change in a market basket of goods and services, including food, energy, and medical care. With the current inflationary prices, the Social Security COLA adjustment may feel like little for many Americans receiving monthly benefits.
Social Security funds through a payroll tax of 12.4 percent on eligible wages; employees and employers each pay 6.2 percent, and self-employed people pay the full 12.4 percent. The maximum work income subject to the Social Security tax is currently $147,000 for 2022 but will increase to $160,200 for 2023.
There's good news for Medicare beneficiaries regarding inflation; their monthly cost will go down in 2023. Medicare premiums for Part B will be $164.90 a month in 2023, down $5.20, or about 3% less than in 2022. The annual deductible for all Medicare Part B beneficiaries will be $226 in 2023, which is $7 less than the 2022 deductible of $233.
Medicare Advantage and Medicare Part D prescription drug plans will also go down in 2023, but deductibles for hospitalization costs under Part A will be going up. Starting in 2023, Medicare will negotiate directly with drug manufacturers for the price of ten specific high-spending brand-name Medicare Part B and Part D drugs that don't have competition. Medicare will announce the first ten drugs in 2023. However, the price change will be effective in 2026.
Medicare will continue to negotiate prices directly with drug manufacturers in the future on the following schedule:
- 5 Part D drugs in 2025 (effective in 2027).
- 15 Part B and Part D drugs in 2026 (effective in 2028).
- 20 Part B and Part D drugs in 2027 (effective in 2029).
- 20 Part B and Part drugs in 2028 and every year after.
Contact our office if you have any questions about Social Security benefits and how they may impact your financial plan today or in the future.