It's no secret that this year's increase in Social Security benefits will be the largest since 1982. The Social Security Administration announced last year that average benefits in 2023 will rise by 8.7% thanks to the program's annual cost-of-living-adjustment (COLA). This increase will start hitting people's Social Security checks soon, and it may have hit some already.
The COLA is intended to try and prevent retirees from losing purchasing power as the cost of living rises. With the average Social Security check for retirees at roughly $1,632 in November, an 8.7% increase means an additional $142 per month or more than $1,700 annually.
The big raise will certainly be welcome by retirees, who have just gotten through an expensive year. But the big bump also comes with a lot more this year that should help retirees in other ways. Let me explain.
Falling Medicare premiums
In another bit of good news for retirees, the Centers for Medicare & Medicaid Services (CMS) announced last year that several standard monthly Medicare premiums would be falling this year. Medicare is the federal health insurance program for people over the age of 65. Some of these premiums are deducted from Social Security checks, so when they decline, that will create a larger Social Security check.
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CMS said that in 2023, the standard monthly premiums for Medicare Part B, which covers certain necessary medical services as well as preventative services, will decline by about 3% to $164.90. CMS also said that the annual Medicare Part B deductible will drop by $7 to $226 in 2023.
This comes after Medicare Part B premiums surged by about 14.5% in 2022 as the program prepared to cover a costly new Alzheimer's drug. However, spending on the drug ended up being lower than expected and resulted in more reserves for Medicare Part B than anticipated, enabling lower premiums this year.
Additionally, the typical Medicare Part D premium, which covers prescription drugs, was also projected to fall slightly by 2% to $31.50 this year. Thanks to the Inflation Reduction Act, a 30-day supply of insulin covered under Medicare will also have a maximum co-pay of $35.
Cooling inflation
Retirees are hopefully in for a much better year
Last year was not easy for retirees. Costs across the board skyrocketed, and it's been well documented over the years that retirees' benefits have lost purchasing power.
But with the largest bump in benefits in four decades, falling Medicare premiums, and better prospects for inflation, retirees should be able to make up at least a little bit of their lost purchasing power and have a much better year in 2023.
