Social Security: 8.7% 2023 COLA Increase – Some People Won’t Be Getting The Increase, Here’s Why
Social Security beneficiaries will soon know what their new monthly payments will be in 2023 after the 8.7% cost-of-living adjustment (COLA) is executed. Starting in December, the Social Security Administration will begin mailing COLA notices to recipients giving details of next year’s payment amounts.
According to a published post by Yahoo Finance, you might wonder why you must wait for the SSA to provide the new amount when you could multiply your current payment by 8.7%, which is not how it works, however. Some payment increases will be higher than 8.7%, and some will be lower.
This is because the COLA is applied to your primary insurance amount (PIA) rather than your current benefit, which is not always the same.
The PIA is the benefit you would get if you elect to begin getting retirement benefits at your normal or full retirement age. At this age, the use is neither lowered for early retirement nor increased for delayed retirement, according to the SSA.
The PIA formula is like something you’d study in a college calculus course. The SSA said on its website that it’s based on the sum of “three separate percentages of portions of average indexed monthly earnings,”. The portions depend on the year a beneficiary reached age 62, became disabled before age 62, or died before attaining age 62.
Social Security recipients will soon find out what their new monthly payments will be in 2023 after the 8.7% cost-of-living adjustment (COLA) kicks in. (Photo: Yahoo Finance)
Social Security Beneficiaries to Receive 8.7% COLA Increase in 2023
When you start collecting Social Security, retirement benefits are an important consideration in terms of your COLA. Not everyone waits until their full retirement age (FRA), which is currently 66 or 67, depending on when you were born to start collecting, Motley Fool reported. If you wait until your FRA before claiming your benefits, your PIA and monthly payment might be the same.
And so, if you get your benefits at a different age, the SSA runs another calculation to adjust the PIA up or down for those who receive it early or late. People who claim benefits before their FRA typically get lowered payments, while those who don’t and wait until they are 70 get the highest possible payment.
In some cases, you might receive a higher COLA than 8.7% because Medicare Part B premiums will be lower in 2023. These premiums are reduced from your Social Security payment, so you’ll have less taken out in 2023 than in 2022 if you have already applied to Medicare. This means your COLA might be above 8.7%.
Moreover, your COLA could be less than 8.7% if you have already started claiming Social Security but plan to apply for Medicare for the first time in 2023. Because the Part B premium will now be withheld from your monthly Social Security payment, it could reduce some of the 8.7% COLA.
This might be the possible case if you switch from Original Medicare to a Medicare Advantage (MA) plan in 2023 and elect to reduce the MA costs of your Social Security payment.
