Social Security recipients will receive an annual cost-of-living adjustment of 8.7% next year, the largest increase since 1981, the Social Security Administration announced Thursday.
The spike will boost retirees’ monthly payments by $146 to an estimated average of $1,827 for 2023.
The hefty increase, which follows a 5.9% adjustment for this year, is aimed at helping Social Security’s roughly 70 million recipients contend with the high inflation that’s been plaguing the US since last year.
“Will the COLA be enough to keep up with inflation? It’s too early to say,” said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, an advocacy group. “It depends on what inflation is going to do from October onwards.”
The adjustment is the highest that most current beneficiaries have ever seen, but that’s because it is based on an inflation metric from August through October, which is also around 40-year highs.
A related metric, the Consumer Price Index, increased 8.2% in September, compared with a year ago, the Bureau of Labor Statistics announced Thursday.
Medicare premiums see a rare decrease
Senior citizens will also see their Medicare Part B premiums drop in 2023, the first time in more than a decade that the tab will be lower than the year before, the Centers for Medicare and Medicaid Services announced last month.
It’s only the fourth time that premiums are set to decline since Medicare was created in 1965.
“This is a once-in-a-retirement event,” said Johnson. “We have a historically high COLA, and at the same time, Part B premiums are going down next year.”
The standard monthly premiums will be $164.90 in 2023, a decrease of $5.20 from 2022.
The reduction comes after a large spike in 2022 premiums, which raised the standard monthly premium to $170.10, up from $148.50 in 2021.
A key driver of the 2022 hike was a projected jump in spending due to a costly new drug for Alzheimer’s disease, Aduhelm. However, since then, Aduhelm’s manufacturer cut the price and CMS limited coverage of the drug.
Also, spending was lower than projected on other Part B items and services, which resulted in much larger reserves in the Part B trust fund, allowing the agency to limit future premium increases.