Social Security recipients struggling with higher inflation get a major boost in their monthly benefits starting next year. The agency announced an 8.7% cost of living increase for 2023 on Thursday.
The adjustment represents the largest one-time increase since 1981, and the largest experienced by beneficiaries alive today. The increase that took effect this year was 5.9%.
The increase will begin with benefits payable to more than 65 million Social Security beneficiaries in January 2023. Increased payments to more than 7 million Supplemental Security Income beneficiaries will begin Dec. 30, 2022, the agency said.
The annual adjustment is calculated by averaging inflation readings among urban wage earners and clerical workers from July, August and September. Annual inflation readings in those months came in at approximately 8.5%, 8.3%, and 8.2%.
Thanks to an unusual quirk, Social Security beneficiaries can expect to realize the full cost of living adjustment increase. In previous years, the annual adjustment was eaten up by increases in the cost of Medicare Part B, the unit of Medicare that pays for doctor and hospital outpatient services.
But Medicare premiums are set to stay flat or even decrease going into 2023 because of a large increase last year tied to a new calculation in the cost of an Alzheimer’s treatment.
Mary Johnson, policy analyst and editor at the Senior Citizens League, said people on fixed incomes have been among those most affected by the 40-year-high inflation rates, which means benefit payments have not kept pace with rising prices this year.
For most beneficiaries, the coming increase will still fall short of what recipients need to catch up with price increases on food and other consumer goods, Johnson said. Already, 37% of participants surveyed by the Senior Citizens League said they received low-income assistance in 2021. That is more than double the 16% who were receiving needs-based assistance before the pandemic.
"Social Security was never designed to be a sole source of income for people," Johnson said.