Out with the old, in with the new. Many Americans will be glad to move past 2022 and begin a new year. And they only have a week left before they'll do so.
Retirees, in particular, have an extra reason to celebrate the new year. There's a huge Social Security increase coming in 2023. How much will your check be?
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Finding out what your amount will be
Social Security's cost-of-living adjustment (COLA) for 2023 is 8.7%. Can you just add that percentage to your current monthly benefit to find out what your new benefit will be? It's not that simple.
The COLA isn't actually applied to Social Security recipients' benefits. It's instead applied to each person's primary insurance amount (PIA). The PIA is the benefit you'd get if you began receiving Social Security retirement benefits at your normal retirement age. If you retired early, your monthly increase will be a little lower than you might have expected.
One obvious way to find out what your new monthly benefit will be is to just wait until January when you receive your first Social Security payment for 2023. But there are ways to find out earlier.
The Social Security Administration (SSA) is mailing COLA notices this month to all Social Security beneficiaries. You might have already received your notice. If not, though, you can access your personal "my Social Security" account online. Go to the Message Center for your account. There should be a message telling you how much your new benefit will be in 2023.
Talking averages
We don't have to jump through any hoops to learn what the average monthly Social Security benefit will be in the new year. The math is simple.
The average monthly Social Security benefit for retirees in 2023 will increase to $1,827. The average was $1,681 prior to the 8.7% COLA. What about cases where both spouses are retired and receive Social Security benefits? The average total monthly benefit for these couples will be $2,972 next year, up from $2,734.
The maximum monthly benefit in 2023 for workers who retired at their full retirement age will be $3,627. This maximum currently stands at $3,345.
Of course, the real maximum Social Security benefit can only be attained by those who wait until they are 70 to retire -- and who had careers that largely provided them with consistently high annual earnings. In 2023, the maximum monthly benefit will be $4,555 compared to $4,194 in 2022.
A few things to note
Some extra dollars may hit your bank account above and beyond the Social Security COLA each month next year. Medicare Part B premiums -- which are automatically deducted from your monthly Social Security benefits -- are decreasing in 2023. The standard Medicare Part B premium will be $5.20 lower next year.
On the other hand, it's possible that your big Social Security increase could boost your income to a level where it's subject to higher federal taxes. You could owe more in state taxes as well, depending on where you live.
There's also no guarantee that the COLA will be enough to offset higher living costs. In fact, more than half of the retirees who responded to a recent Motley Fool survey didn't think the 8.7% increase would be enough.
Still, every person who receives Social Security benefits will get at least a nominal raise. "Out with the old and in with the new" should be a good thing overall in 2023.
