Here’s a Social Security update for the new year
Almost all Social Security beneficiaries are familiar with the most popular and publicized upcoming change: the increase in monthly benefit checks for 2023 due to the automated cost-of-living adjustment, or COLA. In fact, my wife and I just received our letters from the Social Security Administration telling us about the 8.7% increase, and I’m sure you got yours, too.
Even though this is the biggest increase in many decades, I always dread mentioning COLAs in this column because every single time I do, I am flooded with emails from readers complaining that the increase is not enough.
Yet here’s the rub: many economists and social planners believe Social Security COLAs are too generous. (I’ve explained why in past columns, but don’t have the space to get into that argument today.) That’s why most discussions of long-range reform for Social Security include proposals to reduce costof-living increases.
OK, back to the 2023 Social Security COLA. Due to these increases, the average monthly retirement check will be $1,827 in 2023, a $146 increase from the 2022 level. The maximum Social Security check for a worker turning full retirement age in 2023 will be $3,627, compared to $3,345 in 2022. And please note that $3,627 is the maximum for someone turning full retirement age in 2023. That does not mean it is the maximum Social Security payment anyone can receive. There are millions of Social Security beneficiaries who get much more than that, primarily because they worked well past their FRA and/or delayed starting their benefits until age 70.
Here’s another important point about the COLA. Many readers have been asking me if they should have filed for Social Security benefits in 2022 in order to get the COLA that’s paid in January 2023. The answer is no. The COLA will be built into the benefit computation formula. So even if you don’t file for Social Security until next year, or some sub
sequent year, you’ll still get the 8.7% increase.
Although this is a Social Security column, I must mention the upcoming decrease in the Medicare Part B premium, which is deducted from Social Security checks for most people. In 2023, the basic Part B premium will be $164.90. That’s $5.20 less than the 2021 rate. And as has been the case for 20 years now, wealthy people will pay more than the basic premium.
I don’t want to get into this complicated issue of Medicare premiums other than to make this quick point. Even though they are linked in the minds of most senior citizens, Social Security and Medicare are entirely separate programs, administered by entirely separate federal agencies, and they have entirely separate rules and regulations regarding their benefit and payment structures. For example, I already explained how Social Security COLAs are figured. The Part B Medicare premium has nothing to do with the CPI. Instead, by law, it must be set at a level that covers 25% of the cost of running the program. Taxpayers pick up the remaining 75%. (And again, wealthy people pay more than the 25% share.)
If you have a Social Security question, Tom Margenau has two books with all the answers. One is called “Social Security — Simple and Smart: 10 Easy-to-Understand Fact Sheets That Will Answer All Your Questions About Social Security.” The other is “Social Security: 100 Myths and 100 Facts.”