2023 COLA Social Security: Does the 8.7% Increase Matter?

On October 13, 2022, the Social Security Administration announced the largest Cost of Living Adjustment (COLA) increase since 1981. Starting January 2023, Social Security recipients will receive an 8.7% benefits increase. The COLA will result in a $146 per month increase. The average Social Security retiree benefits will increase to $1,827 in 2023 from $1,681 in 2022.

On September 14th, ​​the Senior Citizens League, a non-partisan organization, estimated that Social Security beneficiaries might receive an 8.7% COLA.

Although this is the highest increase since 1981, when the COLA rose to 11.2%, there is reason to be subdued in your excitement. Connie Health Co-founders Oded Eran and David Luna discussed the COLA increase the week of its release. And why you shouldn’t expect to pocket it away in savings.

Watch the video or read the transcription below to learn more.

Oded Eran: Hi, everyone. I’m Oded Eran. Co-founder and CEO of Connie Health. I’m joined here today by David Luna, Co-founder and President of Connie Health. David is a licensed advisor with over 20 years of Medicare experience.

Today we’re talking about the Social Security 2023 cost of living increase or Cost of Living Adjustment (COLA). What it means for your pocketbook and when the COLA is expected to be announced. Again, COLA is Cost of Living Adjustment. David, let’s dive into it. First of all, explain to our viewers. What is a Cost of Living Adjustment, and why does the government do it?

David Luna: Social Security, every year, will give you a Cost of Living Adjustment to try to balance out the inflation.

Of course, we all know that in 2022, and I would say that in 2023 and maybe 2024, we’re still going to be experiencing some of that inflation. So not sure that it’ll ever make up for what you’re spending at the gas station, or what you’re spending at the grocery store, and so forth. But that’s why they do it.

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Oded Eran: 2022. Not the kindest year for Medicare beneficiaries’ pockets. First, we were hit by a steep increase in the Medicare Part B premium. David, do you want to remind us what that was all about?

David Luna: Yeah, so this year – in 2022. Well, let me go back to 2021. The Part B premium is for those of you who are on Medicare and have Part A and Part B. The Part B premium was $148.50 in 2021. And in 2022, they announced the increase to $170.10, which was an increase of $21.60.

In the time that I’ve been in Medicare, I’ve never seen that steep of an increase. And what we were told initially, and there may be some truth to this, is that some of it had to do with making up for the expenses that were brought on by COVID. And then, that increase was also making up for some of the more expensive medications out there.

Oded Eran: Yeah, and that was for the Alzheimer’s drug, that then Medicare dropped, which was one hell of a turn of events.

So, in 2022, Medicare Part B went up by $22. A massive increase. $22 per month. So, 12 times a year, that’s $240. For a couple, that’s almost a $500-a-year increase in the Medicare Part B premium in 2022.

And then, 2022 is a year where the US economy and the world economy have been ravaged by rapid inflation. We all read the papers and see the news talking about the massive, massive inflation. And we go to the gas station, the grocery store, and we see the prices going up and up. This Cost of Living Adjustment will not compensate us for that, correct?

David Luna: Yeah, so just to give you a little bit of a breakdown. You’re absolutely right, Oded.

I don’t know, and I don’t ever predict that there’s going to be a time when you’re going to get a Cost of Living Adjustment that’s going to make up for everything that you’ve paid before today, right? And I see these numbers fluctuate so much.

Let me give you an example. In June of 2022, they predicted that the increase would be around 10.8%, which would mean an average of about $180 extra in your paycheck.

And then in July, they said, oh, it looks like we’re targeting 11.4%. The record, keep in mind, for increases was 11.2% back in 1981. I graduated from high school in 1981. That’s a long, long time ago, folks.

On September 14th, they said okay, the Cost of Living Adjustment looks like it’s going to be estimated at 8.7%. So, for the average worker making around $1,600 bucks a month, that means about an extra $146 in your paycheck, right? So, it’s not much considering what you mentioned earlier. Prices at the gas station, prices at the grocery store.

Oded Eran: Yeah, and that’s the future. We’re already in the red for 2022. Because gas prices went up in 2022. And nobody is going to compensate for that.

Basically, what’s happening is that the government is predicting what the prices will be in 2023 and adjusting the Social Security payments for them. But hopefully, again, we’re not criticizing the government. The government is doing what it can. This is what’s really difficult in times of inflation. You don’t know what the prices are and what they’re going to be in the future because there’s no stable price index.

On one hand, there’s good news. In 2023, Cost of Living Adjustments will kick in, and Medicare beneficiaries will receive a bigger check from Social Security. But we must recognize that this is happening because 2022 was a bad year. In 2022, most likely, Medicare beneficiaries’ disposable income eroded because of the Part B increase and the high inflation that occurred this year.

Okay, David. I think we understand. I think our viewers have a good idea of this Cost of Living Adjustment, why it is happening, and what they should expect. Again, the Cost of Living Adjustment is expected to be announced on October 13th. So keep an eye on that.

David, thank you so much for walking our viewers through it. Again, David Luna, my Co-founder and President of Connie Health. I’m Oded Eran, Co-founder, and CEO of Connie Health. Our job here at Connie is to help older Americans save money and get better care. If you like what you’re viewing here, please like and share. Thank you so much, everyone, for tuning in.

David Luna: Thank you.