You may have read or heard about the new Social Security cost-of-living adjustment (COLA) for 2023 of 8.7%. This represents the largest COLA since 1981. This is a direct response to the inflationary economy we’re currently suffering through, and the fact that inflation climbed faster than expected—0.4% in September - up 8.2% for the year.
Now, depending on where you are so far as Social Security is concerned, this change can impact you in various ways. If you’re still working, it really won’t impact you right away. But if you’re retired and either collecting your Social Security benefit already, or you’re retired and still have yet to fileyou’re your benefit, this change will have an impact on you. Let’s take a look, shall we?
What if you are already retired and collecting Social Security?
If this is the case, you will receive an increase in January in your Social Security benefit. But, it is important to understand that the increase is not likely to equal 8.7% because of other adjustments, such as Medicare Part B premiums or income taxes you’ve authorized to be withheld.
The Social Security Administration (SSA) will notify you by either mail or email about your new benefit amount in December. But, you can also sign into your account at ssa.gov later this year to get this information.
What if you’re retired but haven’t filed for Social Security yet?
It might sound surprising, but this can benefit you as well! Because, when you finally do file, your benefit will be increased by the sum of all the COLAs since you turned age 62, and then adjusted based on the benefit they’re filing for.
Now, you might interpret the COLA news as a message from heaven to file earlier than you had planned. But, before you do that, please reach out to us and let us use our advanced Social Security modeling software to show you the monetary effects of filing at different ages, taking this new COLA into effect. The differences can be significant, and would be something I would want to know before making this decision.
If nothing else, the government’s cost-of-living adjustment notice should reinforce that Social Security does offer some viable protection against higher prices by seeing an upward adjustment on benefits when inflation rears its ugly head. And, as always, should you have questions about this, please reach out to us. Hopefully, we will have answers for you!