We've all had about two weeks to digest the news: Social Security's getting an 8.7% cost-of-living adjustment (COLA) for 2023. That's the third-highest increase since 1980, and it comes as a welcome relief to those who have been struggling to keep up with this year's sky-high inflation. 

But while most know that a COLA means more money for them, a lot of people still don't understand what it is or how it's actually applied to their benefit. So let's take a look.

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Image source: Getty Images.

What's a COLA and how does it affect your Social Security benefit?

A Social Security cost-of-living adjustment is an annual change the government makes to the program each year to help the value of your checks keep up with inflation. It's based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for the third quarter of each year.

For 2023, the government averaged the CPI-W figures for July, August, and September of 2022 and compared them to the average for the same months in 2021. The increase was 8.7%, so the 2023 COLA is also 8.7%

The actual dollar amount your checks will increase by depends on the size of your 2022 benefit. Those who receive larger checks will receive more dollars next year. Here are some projections for some common beneficiary types, based on their estimated average benefits as of December 2022.


December 2022 Benefit

January 2023 Benefit


Single retired worker




Spouse of retired worker




Retired worker and aged spouse




Data source: Social Security Administration.

These increases will kick in automatically as we enter January 2023. You don't have to do anything to claim them, and you'll continue to receive this new, higher rate for the whole year.

It might not change as much as you expect

Seniors may have a little more breathing room in their budgets in 2023 compared to the last few months of this year, but even if you beat the average $147 increase, your buying power isn't going to change much. The COLA is only supposed to help your checks maintain their value over time, not increase it. And some argue that they don't even do that job very well.

The CPI-W that the government bases COLAs on is calculated by looking at the prices of a basket of goods that a typical urban wage worker might buy, and this doesn't provide the best measure of senior spending habits. Some have argued that Social Security COLAs should be calculated based on the Consumer Price Index for the Elderly (CPI-E), which many consider a better reflection of the average senior's spending.

But that's not how it works. As it currently stands, Social Security has lost about 40% of its buying power since 2000, according to the Senior Citizens League. An 8.7% COLA will lessen some of the recent pain seniors have felt due to high inflation, but it's possible this larger, more worrisome trend will continue over time.

That doesn't mean you shouldn't celebrate your historically high 2023 COLA. Just try to keep it in perspective. If you hope to significantly change your lifestyle, you'll need to do more. Boosting your income by working a job or reducing spending will make a bigger difference to your finances than the COLA will.