retirement

What Is the Social Security COLA?

Consumer prices have spiked this year, meaning a higher Social Security cost-of-living adjustment for 2022.

High inflation this year means that Social Security benefits will increase about 9.7% next year. That will be the largest cost-of-living adjustment (COLA) since 1981. That is also higher than the COLA for 2022, which was already a high 5.9%.

The estimated average monthly Social Security benefit payable in January 2023 will increase from $1,657 in 2022 to $1,818. The average monthly benefit for a couple who are both receiving benefits will rise $267, from $2,753 to $3,020. And the maximum Social Security benefit for a worker retiring at full retirement age will increase from $3,345 per month to $3,670, an additional $325.

Also, more of workers’ income will be subject to the Social Security tax in 2023. The Social Security tax will apply to roughly the first $153,000 of earnings, up about $6,000 from $147,000 in 2022.

All of the above are rough estimates. The Social Security Administration will determine the final numbers for 2023 on October 13.

COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (similar to, but not exactly the same as, the urban dwellers’ consumer price index used in inflation reporting). If prices don’t increase and even fall, the COLA is zero. That happened in 2010 and 2011, as the economy struggled to recover from the Great Recession, and again in 2016, when plummeting oil prices swept away any chance of a COLA for that year.

How Is the 2022 Social Security COLA Calculated?

As mentioned, any COLA adjustment is driven by changes in the wage earners’ consumer price index. National average prices are used, not regional. SSA also calculates the percent change between average prices in the third quarter of the current year with the third quarter of the previous year. The reason the fourth quarter isn’t used is because that number is typically not available from the U.S. Bureau of Labor Statistics until mid-January, and the SSA has to make its adjustment on January 1.

History of Social Security COLAs, 2009-2022

  • 2022: 5.9%
  • 2021: 1.3%
  • 2020: 1.6%
  • 2019: 2.8%
  • 2018: 2.0%
  • 2017: 0.3%
  • 2016: 0%
  • 2015: 1.7%
  • 2014: 1.5%
  • 2013: 1.7%
  • 2012: 3.6%
  • 2011: 0%
  • 2010: 0%
  • 2009: 5.8%

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