Social Security is a lifeline for many seniors, but it's often not enough to pay for all their retirement expenses. The average projected benefit for December 2022 is $1,680 per month, but as inflation has shot up this year, the amount of goods that money will buy has gone down.
Fortunately, seniors should get a little relief as we move into 2023. Here's a look at what you can expect from your benefits once we ring in the new year.
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Why are Social Security checks going up in 2023?
Social Security checks are set to jump next year thanks to the annual cost-of-living adjustment (COLA). The Social Security Administration does this every year to help your benefits keep up with inflation.
It determines the COLA by looking at the third-quarter inflation data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) and comparing it to the data from the year before. The increase determines the COLA for the following year.
In 2023, the COLA is 8.7%. That's the third-highest increase since 1980. However, it's only this high because we've seen record inflation this year, which has driven up the cost of pretty much everything.
What does this mean for your Social Security checks?
The average Social Security check is expected to jump by $147 in January 2023, from $1,680 to $1,827 per month. That amounts to nearly $22,000 in benefits next year, and some people could see a lot more.
The exact increase you get will depend on the size of your checks today. You can get a rough idea by adding 8.7% to your current Social Security benefit, but the actual calculation for applying COLAs to your benefit is more complicated. The government applies the COLA to your primary insurance amount -- the amount you qualify for at your full retirement age (FRA). This is between 66 and 67 for today's workers. Then, it adjusts your benefit up or down as necessary if you claimed Social Security early or late.
The Social Security Administration plans to send out notices to all Social Security beneficiaries in December that will inform them of their new benefit amount for 2023. You can also look yours up in your my Social Security account beginning in early December.
Hopefully your benefit increase gives you a little more breathing room in your budget for next year, but don't expect too much. These COLAs are only designed to help your checks keep up with rising costs, not to provide you with additional buying power. And some argue that they don't even keep pace with inflation all that well.
You still need a budget and, ideally, one or more other sources of income to help supplement your Social Security benefits. Personal savings, a part-time job, or a pension can all help improve your retirement security while reducing your dependence on Social Security.
