Inflation has hovered around a four-decade high for most of the past year, driving double-digit price hikes in basic necessities like groceries, gasoline and electricity. To make matters worse, the norm Health insurance premium part B received one of the largest price increases in history this year. These events have eroded the purchasing power of Social security benefitsmaking life difficult for millions of American retirees.
Fortunately, changes to Social Security and Medicare in 2023 should ease the burden. Here are two reasons why retired workers will get a bigger Social Security check next year.
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1. An unusually large cost-of-living adjustment for Social Security benefits
The Social Security Administration (SSA) is implementing a cost of living adjustment (COLA) to keep services in line with rising prices. After suffering the worst bout of inflation in four decades in 2022, it’s no surprise that beneficiaries will get the biggest COLA in four decades in 2023. Specifically, Social Security benefits will increase by 8.7% l next year, marking the largest increase since 1982.
What impact will this have on Social Security checks? The average retired worker will get an extra $146 a month next year, according to the SSA, but that figure will vary from person to person. For example, anyone who received the maximum monthly Social Security benefit of $4,194 in 2022 will receive an additional $365 each month in 2023.
Fortunately, anyone can estimate the 8.7% COLA impact on their monthly Social Security check by multiplying their current benefit by 1.087. Alternatively, SSA will send COLA notices by mail in December detailing updated benefit information for 2023. Beneficiaries can also view the COLA notice in the message center of their my Social Security Account.
2. A rare decrease in the standard Medicare Part B premium
Most people become eligible for Medicare at age 65, three years after reaching eligibility for Social Security retirement benefits. Medicare Part A covers inpatient care in hospitals and skilled nursing facilities, while Medicare Part B covers outpatient care, durable medical equipment, and certain preventative services like vaccines. Most people get Part A for free, but recipients must pay a premium for Part B, and those premiums are deducted directly from monthly Social Security checks.
To that end, when the standard Part B premium jumped 14.5% to $170.10 per month in 2022, it dramatically reduced Social Security benefits paid to retirees. But the exact opposite will happen next year. The standard Part B premium will drop 3% to $164.90 per month, marking only the second drop in the past two decades. Most Social Security recipients over 65 will save $5.20 a month on Part B coverage next year.
The downside of a bigger social security check
Overall, the unusually high Social Security COLA, coupled with the rare decrease in Medicare Part B premiums, is good news for retirees. A bigger Social Security check in 2023 could help restore some of the purchasing power benefits lost in 2022. But there’s a downside. A bigger Social Security check in 2023 will also mean a biggest tax bill for certain beneficiaries when they file their 2023 tax return in early 2024.
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