Those who receive Social Security will soon learn what their new monthly benefits will be in 2023 once the cost-of-living adjustment (COLA) of 8.7% takes effect.
The Social Security Administration will start distributing beneficiaries’ COLA notices in December with information on the amounts of their payments for the next year.
Could You Receive an Addition Payment in Social Security Next Year?
Why not just multiply your current payment by 8.7% instead of having to wait for the SSA to give you the new amount?
But it doesn’t operate like that. In some cases, payment increases will exceed 8.7% in other others, they won’t.
This is because the COLA is applied to your primary insurance amount (PIA) rather than your current benefit, and the two are not necessarily the same. The PIA, according to the SSA, is the benefit you would receive if you chose to start receiving retirement benefits at your regular or full retirement age.
The benefit is neither decreased for early retirement nor enhanced for delayed retirement at this age. The PIA formula seems like a topic covered in a calculus course in college.
The SSA stated on its website that it is calculated using the total of three distinct percentages of sections of average indexed monthly earnings.
The portions are determined by the year the beneficiary became 62, became incapacitated before turning 62, or passed away before turning 62.
The age at which you begin receiving Social Security retirement payments has a significant impact on your COLA. Not everyone waits until they reach their full retirement age (FRA), which is presently 66 or 67, depending on when they were born, as Motley Fool observed.
Your PIA and monthly payout can be the same if you wait to apply for benefits until your FRA. However, if you apply for benefits at a later age, the SSA does a separate computation to change the PIA upward or downward depending on when you apply.
While those who wait until they are 70 obtain the maximum amount, those who apply for benefits before their FRA often receive lower payments. Because of the anticipated decrease in Medicare Part B rates in 2023, you might occasionally receive a COLA of more than 8.7%.
Here’s the Catch!
If you have previously enrolled in Medicare, the premiums will be withdrawn from your Social Security benefit in 2023 rather than 2022. Because of this, your COLA may be more than 8.7%.
If you’ve already begun receiving Social Security benefits but intend to enroll in Medicare for the first time in 2023, your COLA may be less than 8.7%.
Your monthly Social Security check may no longer include the Part B premium, which may reduce the 8.7% COLA.
According to the SSA, the new payment amount for anyone receiving Social Security benefits will begin in January 2023. The new payment amounts will start for persons who receive Supplemental Security Income (SSI) on December 30, 2022.
Some beneficiaries receive both forms of benefits, and they will also receive payments on these dates, with SSI payments increasing somewhat before Social Security payments do.
In addition to being a record rise, the COLA for 2023 is also noteworthy in that beneficiaries will receive the whole increase because Medicare Part B premiums will be lower the following year.
Previously, Medicare premium increases that cover doctor and outpatient hospital medical services would cancel out the COLA.