Social Security COLA Increase 2023 SSI Cola Increase for 2023
Social Security COLA Increase 2023 SSI Cola Increase for 2023, Starting next year, Social Security recipients will receive a larger monthly check. As the program’s annual cost of living adjustment, known as COLA, reaches an all-time high.
In 2023, the average monthly Social Security benefit will rise by more than $140. It’s the largest increase in about 40 years.
What is a COLA?
A COLA, or cost-of-living adjustment, is a change to a regular payment. That reflects a change in the cost of goods and services at the same time. The majority of COLAs are applied to government payments. Yet, some businesses take into account changes in the cost of living when revising compensation.
In the United States, the major group that benefits from a COLA is Social Security retirees. COLAs are also given to SSI recipients. The blind and crippled, and certain military retirees.
COLAs, among other things, enable beneficiaries of Social Security. And Supplemental Security Income (SSI) preserve their purchasing power. As inflation rises, these benefits lose value. Especially for individuals who rely on them for a fixed income.
The SSA automatically awards a COLA to Social Security and SSI beneficiaries each year. The COLA is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
How is it Calculated?
To mitigate the negative effects of inflation on Social Security benefits. The program awards an annual cost-of-living adjustment (COLA). It is computed by comparing the Consumer Price Index for Urban Wage Earners. And Clerical Workers from the third quarter of the year. Before the COLA goes into effect the same average from the current year.
The SSA hasn’t announced the 2023 COLA. But experts estimate it will be larger than the 5.9% increase implemented last year. The COLA will be a win for Social Security recipients, who could see their monthly checks rise by more than $140.
The SSA will calculate the COLA by using inflation data from the Bureau of Labor Statistics. Which tracks the prices of goods and services every month. The CPI-W is the most important measure of inflation. As it includes a range of items including household purchases like food and shelter.
What is the Difference Between a COLA and a Pay Raise?
Often, the terms raise and COLA are used interchangeably, but there is a big difference. A pay raise is generally linked to the economy. Your region of work and the industry you are in whereas a COLA is typically linked to inflation.
Public pensions frequently incorporate cost-of-living adjustments. And the Social Security Administration to keep pensioners on fixed incomes up to date with inflation. Your employees, on the other hand, do not have a set salary. And they require incomes and earnings that are commensurate with the cost of living.
The yearly Social Security COLA is calculated by dividing the percentage. Increase in the Consumer Price Index for Urban Wage Earners by the number of years worked. And Clerical Workers (CPI-W) from the previous year’s third quarter to the current year’s third quarter. Social Security benefits were not automatically increased each year before 1975. As a result, the value of a retiree’s Social Security income was constantly reduced by inflation.
What is the 2023 COLA Percentage?
When you receive Social Security or SSI benefits, your payment is adjusted annually by a COLA. These increases are tied to consumer prices and are based on the average cost of living. The Consumer Price Index for Urban Wage Earners and Clerical Workers measures this.
Usually, the COLA percentage for a given year is set. By the Social Security Administration (SSA). based on the CPI data from July, August, and September of that year. The SSA also uses a formula to determine the percent change between the previous year’s average CPI and the current year’s.
For 2023, the SSA announced that Social Security beneficiaries will get an 8.7% increase in their monthly payments. That’s the fourth-largest COLA in program history. And it will boost the average retired worker’s check by $146 per month, according to AARP.
The significant increase indicates that the country’s economy is improving. Yet, experts warn that this year’s large rise may hasten the depletion of Social Security’s trust funds by at least one calendar year. It will be critical for older people to plan for the future. Where COLAs are lower than the national average. If inflation remains “cool” or interest rates continue to increase.