After a difficult year in 2022, in January, Social Security benefits jumped by the highest percentage in roughly four decades. The average Social Security benefit this year is expected to rise by 8.7% to more than $1,700.
Meanwhile, based on the government's reports, inflation has started to cool since the summer, and retirees could see some of their expenses fall as well. With so much trending positively this year, are retirees headed for the best year of Social Security ever in 2023? Let's take a look.
Bigger checks
Not only are Social Security benefits rising significantly this year thanks to the unusually large cost-of-living adjustment (COLA), but checks will also feel bigger in other ways because several Medicare premiums are shrinking.
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The Centers for Medicare and Medicaid Services announced last year that in 2023, the standard monthly Medicare Part B premiums would be cut by about 3% to $164.90 per month. The Medicare Part B annual deductible is also dropping this year. Additionally, standard monthly Medicare Part D premiums are also going down slightly. Many people pay their Medicare Part B and D premiums by having them deducted directly from their monthly Social Security checks, so the fact that they are falling this year will give those checks a little boost.
Social Security benefits haven't had such a large cost-of-living adjustment in more than 40 years, and Medicare Part B premiums haven't fallen since 2012, so this year will certainly be special.
Data also continues to show that price growth is falling from the peak it hit in June 2022, so hopefully, the Federal Reserve's interest rate hikes will continue to work their way through the economy and get inflation back in check without triggering too deep of a recession.
Putting everything into context
Higher benefits and falling Medicare premiums will certainly be a nice change from last year, but to answer the question of whether this will be the best year of Social Security ever, one really has to put things into context.
In January of most years, Social Security benefits are raised via the program's annual cost-of-living-adjustment, which is calculated based on how strong inflation was in the third quarter of the prior year. So the higher benefits that were implemented this month were a natural result of last year's unusually high inflation.
Furthermore, while Medicare cut its Part B premiums for 2023, in 2022, it increased them by 14.5%, in part because the program's administrators had anticipated that its expenses were going to rise significantly due to coverage of a new Alzheimer's drug. That was one of the biggest jumps in Medicare's history, so while Part B premiums did get cut for this year, they are still high, all things relative.
Will 2023 be the best year ever?
Make no mistake, I think 2023 will be a solid year for retirees. Social Security benefits are way up, Medicare premiums are falling, and hopefully, inflation will keep falling.
But after a year during which inflation topped out at over 9% and Medicare premiums shot up, there's still a lot to make up for. Ultimately, 2023 should be a good year, but probably not the best ever.
