No one's been completely unaffected by 2022's record inflation, but few groups have been hit as hard as retirees. Many have had to withdraw more money from their retirement accounts and tighten their belts just to cover their essential costs, and sometimes even that's not enough.
But in the last few weeks, seniors have gotten two pieces of great news that could help ease the pain in 2023. The average retiree can expect an extra $1,826 to help them with their bills, but you could wind up with even more. Here's what you need to know.
1. Medicare's Part B costs are decreasing
For the first time in over a decade, Medicare Part B costs will decrease in 2023. Part B, also known as medical insurance, covers outpatient care and home healthcare as well as preventive services, while Part A covers in-patient hospital and nursing facility stays.
Most people don't pay a premium for Part A coverage and haven't for years, but Part B premiums rose to a record $170.10 a month in 2022. Now, they're set to fall to $164.90 per month in 2023. That's only a $5.20 monthly savings, but it's much better than a premium hike.
Part B's deductible is also declining in 2023 from $233 to $226. This might not bring you any savings if you don't have to visit the doctor at all next year, but if you need medical care, this will help you save an additional $7.
2. Social Security's getting an 8.7% raise
The Social Security Administration announces a cost-of-living adjustment (COLA) every year that helps seniors' checks keep up with inflation. And since inflation has been really high this year, the 2023 COLA is one of the highest ever at 8.7%.
The average retired worker will get an extra $147 a month beginning in January, but you could wind up with more or less than that. The $147 figure is based on an average monthly benefit of $1,680. If your current Social Security checks are larger than this, you will likely see a bigger increase. And if your 2022 checks are under $1,680, you'll still get larger checks, but the increase will be smaller.
More money doesn't mean more buying power
Together, the $5.20 reduction in the Medicare Part B premium and the Social Security COLA for the average worker will add about $1,826 to the average senior's budget, again with some variability depending on how your Social Security check stacks up to the average. But this extra cash isn't going to significantly change what you can afford next year. At best, you'll wind up about where you were before the inflation rate skyrocketed.
If you want to meaningfully increase your buying power, you're going to have to take steps to increase your income, decrease your expenses, or both. What this looks like will depend on what's feasible for you. Some possible solutions include:
- Working at least part-time.
- Cutting discretionary items from your budget.
- Renting out unused property.
- Looking for opportunities to reduce essential costs, like taking advantage of senior discounts or applying for other government benefits.
This might not be ideal, but the more you can take control of your retirement income, the easier it will be to weather financial ups and downs. We can't be sure that Social Security will get another sizable COLA or that Medicare costs won't start climbing again in 2024. So you're better off boosting your own income if you're able to do so.