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Seniors are getting a big Social Security raise — why it may not be enough


The 66 million Americans on Social Security are getting a big cost-of-living increase: 8.7%. It goes into effect in December, with the first payment made in January 2023. It’s the biggest hike since the 11.2% cost of living adjustment (COLA) announced back in 1981.

Thursday’s announcement by the Social Security Administration would lift the average monthly benefit by more than $140 a month to about $1,814 for retired workers and dependents, and about $1,480 for disabled workers and dependents from the current $1,362. 

Every last penny of that 8.7% hike is needed. The cost of living (CPI) index has soared in 2022, rising 8.2% for the 12 months ended in September But food inflation is much higher, with grocery prices rising 13.5% for the year ended in August, according to the latest data from the Labor Department. 

Read: Social Security’s COLA is no bonus

What’s behind this inflation? Let me count the ways. Some of it is tied to Russia’s war in Ukraine, which has pinched commodities, helping to drive up prices globally. Here at home, U.S. cattle ranchers say climate change—as in rising heat and vanishing water supplies—is causing them to thin their herds, driving up meat prices. And some critics say heavy government spending to help Americans stay afloat during the pandemic has also contributed to inflation. 

Then there are heating prices. Natural gas—used to heat the most of American homes—is up 35% over the last two years, according to Mark Wolfe, executive director of the National Energy Assistance Directors Association. “And supplies are tight, because many utilities drew down their natural gas inventories to generate electricity during the summer.” U.S. households are looking at an average power bill of $1,359 this winter, according to the Energy Information Administration, a federal agency. 

The concern here is that these kinds of increases—for absolute must-haves like food and energy—will squeeze millions of Americans who remain heavily dependent, if not utterly so, for the bulk of their income. The latest figures from the Social Security Administration show just how precarious things are for so many:  

As of June 2022: 

  • Social Security benefits represented about 30% of all income for elderly Americans.

  • 37% of elderly male recipients and 42% of elderly female recipients relied on Social Security for 50% or more of their income. 

  • 12% of these men and 15% of these women relied on Social Security for 90% or more of their income. 

The math isn’t difficult here. If the Social Security COLA is 8.7%, but food and energy have gone up more than that, it will unquestionably mean further pain and difficult choices for millions of elderly Americans. 

But one thing could actually help seniors gain ground on inflation in 2023: the lowering of Medicare premiums for many beneficiaries. The decline applies to Medicare Part B, which provides outpatient medical coverage. After jumping 14.5% from 2021 to 2022 (the hike was designed to help pay for Aduhelm, an Alzheimer’s treatment), premiums are now slated to fall 3.0% to $164.90 per month. The annual Part B deductible will also fall 3% to $226.

“This is excellent news for seniors and people with disabilities who receive Medicare, most of whom have these premiums deducted directly from their Social Security payments,” says Nancy Altman, president of Social Security Works, a Washington-based advocacy group. 

What’s good about this, Altman points out, is that “in years past, rising Medicare premiums have often consumed most or even all of the (Social Security) increase for many beneficiaries. This won’t be the case in 2023.”

White House press secretary Karine Jean-Pierre said Wednesday that the combination of a Social Security boost and cut in Medicare premiums is a double benefit for seniors. “We will put more money in their pockets and provide them with a little extra breathing room,” she said.

It’s important to remember that there are tax implications for Social Security earners. The COLA increase (along with wages and interest from certain investments) could push some recipients into a higher tax bracket. Here’s what you need to know: 

  • Single filers making $25,000 or less, or couples making $32,000 or less pay no taxes on their Social Security benefits.

  • Single filers making between $25,000 and $34,000, and couples making between $32,000 and $44,000, pay taxes on up to 50% of their benefits.

  • Single and joint filers making above those thresholds pay taxes on up to 85% of their benefits.

  • An easy way to remember this: 15% of Social Security benefits — roughly $3,200 in 2023 — will always be tax-free.


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