“Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans are set to increase by 8.7 percent in 2023 under the Social Security COLA 2023 Scheme. Go through this post to know all the details“
Cost of Living Adjustments (COLA) is an amazing program that empowers US citizens financially. It makes sure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits does not get affected by inflation. COLA is based on the percentage in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In the year 2023, the administration is going to increase Social Security and Supplemental Security Income by 8.7% with the implementation of Social Security COLA 2023. Go through this post to understand all minute details of the program.
History of Social Security COLA
Cost-of-living adjustments (COLA) are a way for the government to adjust its benefits to match the current cost of living. COLAs take into account the inflation rate and changes in the standard of living. The government provides a COLA adjustment every year on January 1st. But, do you know how this scheme got started? Let’s check out the history of the program.
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- The COLA provision was part of the 1972 Social Security Amendments.
- Automatic annual COLAs were introduced in 1975. Before 1975, the benefits were raised or increased only when Congress enacted special legislation.
- With the introduction of annual COLAs, COLAs were tied to the annual increase in the Consumer Price Index (CPI-W). In this way, Social Security benefits become immune to inflation.
- From 1975 to 1982, COLAs effective with Social Security Benefits were received by beneficiaries in the month of July (payable for June). After 1982, the same have been received by beneficiaries in the month of January (payable for December).
- Automatic Cost-Of-Living Adjustments (COLA) received since 1975 are given in the following table.
|July 1975 – 8%||January 1993 – 3.0%|
|July 1976 – 6.4%||January 1994 – 2.6%|
|July 1977 – 5.9%||January 1995 – 2.8%|
|July 1978 – 6.5%||January 1996 – 2.6%|
|July 1979 – 9.9%||January 1997 – 2.9%|
|July 1980 – 14.3%||January 1998 – 2.1%|
|July 1981 – 11.2%||January 1999 – 1.3%|
|July 1982 – 7.4%||January 2000 – 2.5%|
|January 1984 – 3.5%||January 2001 – 3.5%|
|January 1985 – 3.5%||January 2002 – 2.6%|
|January 1986 – 3.1%||January 2003 – 1.4%|
|January 1987 – 1.3%||January 2004 – 2.1%|
|January 1988 – 4.2%||January 2005 – 2.7%|
|January 1989 – 4.0%||January 2006 – 4.1%|
|January 1990 – 4.7%||January 2007 – 3.3%|
|January 1991 – 5.4%||January 2008 – 2.3%|
|January 1992 – 3.7%||January 2009 – 5.8%|
|January 2010 – 0.0%||January 2011 – 0.0%|
|January 2012 – 3.6%||January 2013 – 1.7%|
|January 2014 – 1.5%||January 2015 – 1.7%|
|January 2016 – 0.0%||January 2017 – 0.3%|
|January 2018 – 2.0%||January 2019 – 2.8%|
|January 2020 – 1.6%||January 2021 – 1.3%|
|January 2022 – 5.9%||January 2023 – 8.7%|
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In the United States, cost-of-living adjustments are made every year to reflect changes in the cost of living. This allows beneficiaries to keep up with the changing cost of living in their area. Most retirees are eligible for COLA starting at the age of 62 under one of the following federal retirement programs.
- Civil Service Retirement System (CSRS)
- Federal Employees Retirement System (FERS)
- FERS Special
- Organization and Disability Retirement System (ORDS)
Note: Please note that some special retirees like disability, survivor, and other special provisions, have different rules for COLA entitlement.
COLA Calculation Method
There is a formula specified in the Social Security Act for the determination of COLA. As per this formula, COLAs are proportional to the increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The Bureau of Labor Statistics has the responsibility to calculate CPI-Ws on a monthly basis.
In a specific manner, we can say that a COLA effective for December of a year is equal to the percentage increase in the CPI-W from the average for the 3rd quarter of the current year to the average for the 3rd quarter of the last year. If there is an increase, it is rounded to the nearest 10th of 1%. In case there is no increase, there is no COLA for the year.
Check the following table to know how we get this figure of 8.7%
|Month||CPI-W for 2021||CPI-W for 2022|
|3rd Quarter Total||805.262||875.702|
|Average (rounded to the nearest 0.001)||268.421||291.901|
(291.901 – 268.421) / 268.421 x 100 = 8.7 percent
Now that you understand how COLA is calculated, let’s take a look at what changes are going to take place this year.
Social Security COLA 2023
Social Security COLA in 2023 is going to give a huge relief. On the basis of the rise in the Consumer Price Index (CPI-W) from the 3rd quarter of 2021 through the 3rd quarter of 2022, Social Security and Supplemental Security Income (SSI) beneficiaries will get 8.7% COLA for 2023.
All Crucial 2023 Social Security information is as follows.
|Maximum Taxable Earnings 2022||Maximum Taxable Earnings 2023|
|Social Security (OASDI Only)||$147,000||$160,000|
|Medicare (HI Only)||No Limit|
|Quarter of Coverage 2022||Quarter of Coverage 2023|
|Retirement Earnings Test Exempt Amounts|
|Under full retirement age||$19,560/yr ($1,630/mo)||$21,240/yr ($1,770/mo)|
|Social Security Disability Threshold – Substantial Gainful Activity (SGA)|
|Trial Work Period (TWP)||$970/month||$1050/month|
|Maximum Social Security Benefit: Worker Retiring at Full Retirement Age|
|SSI Federal Payment Standard|
|SSI Resource Limit|
|SSI Student Exclusion|
|Estimated Average Monthly Social Security Benefits Payable in January 2023|
|Before 8.7% COLA||After 8.7% COLA|
|All Retired Workers||$1,681||$1,827|
|Aged Couple, Both Receiving Benefits||$2,734||$2,972|
|Widowed Mother and Two Children||$3,238||$3,520|
|Aged Widow(er) Alone||$1,567||$1,704|
|Disabled Worker, Spouse and One or More Children||$2,407||$2,616|
|All Disabled Workers||$1,364||$1,483|
Frequently Asked Question
Yes, children up to the age of 22 are eligible for such benefits.
Yes. However, you are eligible for a prorated amount. Please note that FERS annuitants under age 62 are eligible for COLA under certain conditions only.
The amount is payable in the month of December. You will get the adjusted amount in January.
Yes, it is revised every year.
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