Retirees: Here's How Big Your Social Security Benefit Could Be in 2023

Social Security is a key source of financial well-being in retirement. In fact, 55% of retired workers say monthly benefits are a "major source" of income, and another 34% say they are a "minor source" of income, according to a Gallup poll. Put another way, nearly 90% the nation's retirees depend on Social Security benefits to some degree.

Unfortunately, many of those individuals now find themselves in difficult financial straits. Scorching inflation hit a four-decade high on several occasions in 2022, and necessities like gas, groceries, and electricity have notched double-digit price increases over the past year, easily outpacing the 5.9% cost-of-living adjustment (COLA) applied to Social Security benefits in 2022. In other words, benefits have lost buying power this year.

To account for that, Social Security checks will get an 8.7% COLA in 2023 -- the largest COLA in four decades, and the fourth-largest COLA in history. That extra cash should help retired workers and other beneficiaries battle runaway inflation.

Here's how big your Social Security benefit could be next year.

Image source: Getty Images.

The maximum Social Security benefit for newly retired workers in 2023

Each year, the formula used to calculate benefits for newly retired workers is adjusted to account for changes in general wage levels. That means the maximum benefit tends to increase from one year to the next. For instance, the maximum benefit for retired workers who claim Social Security at full retirement age is $3,627 in 2023, up 8.4% from $3,345 in 2022.

The chart below shows the maximum Social Security benefit payable to newly retired workers of different ages in 2023.

Data source: Social Security Administration.

As a caveat, beneficiaries must have 35 years of earnings that exceed the maximum amount subject to Social Security payroll tax -- that figure is $160,200 in 2023 -- to qualify for the maximum benefit. Only about 6% of the population actually reaches that threshold, so the vast majority of retired workers will receive a smaller Social Security check in 2023.

The average Social Security benefit for retired workers in 2023

According to the Social Security Administration, the average monthly benefit paid to retired workers will be $1,827 in January 2023, an increase of $146. Of course, the average benefit considers a wide range of ages, and age is a crucial variable in the formula used to calculate benefits. For that reason, it makes sense to break the information down by age.

The chart below shows the average monthly benefit, by age, that will be paid to retired workers in January 2023. The figures in the chart are estimated based on benefit data from January 2022.

Data source: Social Security Administration.

As a caveat, Medicare Part B premiums are typically deducted directly from Social Security checks each month. To account for that, you need to subtract your Part B premium from the relevant figure shown in the chart above. For most people, the Part B premium will be $164.90 in 2023, but beneficiaries with income exceeding $97,000 will pay a higher premium.

It's also worth mentioning that the size of your Social Security benefit depends on two things: your lifetime earnings and your age when you claim Social Security. That mean your actual benefit amount in 2023 may be above or below the estimates shown in the chart. But you will soon know the exact figure.

The Social Security Administration will send your COLA notice by mail in December, and it will detail your updated benefit amount for 2023. Additionally, most beneficiaries can also view their COLA notice and updated benefit amount online -- through the Message Center of their my Social Security account -- in December.