An independent seniors’ group, the Senior Citizens League, predicted that the COLA for Social Security retirement payments in 2023 could be 8.7 percent. The increase would be the biggest in almost 40 years.
“A COLA of 8.7 percent is exceedingly exceptional and would be the highest ever earned by most Social Security pensioners alive today”, the SCL said in a press brief. Since implementing the first set of automated adjustments in 1979â€“1981, only three previous times saw a higher value.
The estimate is based on the most recent data from the Bureau of Labor Statistics CPI-W, issued in September.
Each COLA is calculated according to a formula detailed in the Social Security Act. To account for inflation, this formula for cost-of-living adjustments (COLAs) uses the Consumer Price Index for Urban Wage Earners and Clerical Workers as its base (CPI-W).
A COLA that takes effect in December of a given year is equal to the percentage rise (if any) in the average CPI-W for the third quarter of that year over the average for the third quarter of the year preceding the one in which a COLA took effect. The Social Security Administration (SSA) shall round any increment to the nearest tenth percent. If there is no rise or the increase rounded down to zero, there will be no cost-of-living adjustment (COLA).
The COLA for the Civil Service Retirement System (CSRS) and Federal Employees Retirement System (FERS) are determined differently.
The CSRS COLA is based on the CPI-W, published by the Bureau of Labor Statistics (BLS).
The CPI-W increase from the current year’s third quarter to the previous year’s third quarter is used to calculate the COLA. If there is an increase, the COLA is applied to the annuities of CSRS retirees. FERS COLA, on the other hand, is based on the Consumer Price Index for Urban Consumers
(CPI-U) is also published by the BLS. The COLA for FERS is calculated as the percentage increase in the CPI-U from the current year’s third quarter to the previous year’s third quarter. If there is an increase, the COLA is applied to the annuities of FERS retirees.
It’s worth mentioning that both CSRS and FERS COLAs are subject to a “hold harmless” provision, which means that the COLA cannot cause a retiree’s annuity to decrease. Therefore, if the COLA causes a decrease in a retiree’s annuity, the COLA will not be applied that year. Additionally, both CSRS and FERS COLA are capped at 2% annually. Therefore, if the calculated increase is higher than 2%, it will be capped at that amount; this is done to avoid significant and sudden increases in retirement benefits.
Comparing the FERS COLA to the CSRS COLA is seen in the following table:
The cost of Medicare Part B premiums could stay about the same in 2023.
According to the SCL, Medicare Part B premiums might not increase significantly in 2023. In their 2022 annual report, the Medicare Trustees projected that the regular Part B premium in 2023 would stay at $170.10 per month, the same as in 2022. The Medicare Part B premium and associated charges are typically disclosed around mid-November.
The Impact of the Social Security COLA on Medicare Costs
Some higher-income earners may have to pay extra for Medicare Part B (medical insurance) and Part D (prescription drug coverage) benefits due to an 8.7% Social Security COLA for 2023.
While Part B and Part D rates are based on an income-related monthly adjustment amount adjusted for inflation, a married couple filing tax jointly who earns just a few dollars more than one of Medicare’s income criteria may see significant premium increases.
According to Kotlikoff, your Medicare costs could increase by $800, $900, or $1,000 [per month] if you earn an extra dollar or two in Social Security benefits.
According to Mary Johnson, a Social Security policy expert for the Senior Citizens League, with an impending significant Social Security COLA, it’s essential to investigate how much taxes you might owe.
Johnson advises all Social Security recipients to sign into their My Social Security accounts and then talk to a qualified financial advisor about their income tax withholding.
According to Johnson, you will need to modify your projected taxes if you anticipate that your taxable income will be 10%
After entering the financial services industry in 1994, it was a desire to guide people towards their financial independence that drove Aaron to start Steele Capital Management in 2013. Armed with an extensive background in financial planning and commercial banking coupled with a sincere passion for helping people, Aaron has the expertise and affinity for serving the unique needs of those in transition. Clients benefit from his objective financial solutions and education aligned solely with
helping them pursue the most comfortable financial life possible.
Born in Olympia, Washington, Aaron spent much of his childhood in Denver, Colorado. An area outside of Phoenix, Arizona, known as the East Valley, occupies a special place in Aaron’s heart. It is where he graduated from Arizona State University with a Bachelor of Science degree in Business Administration, started a family, and advanced his professional career.
Having now returned to his hometown of Olympia, and with the days of coaching his sons football and baseball teams behind him, he now has time to pursue his civic passions. Aaron is proud to serve on the Board of Regents Leadership for Thurston County as the Secretary and Treasurer for the Morningside area. His past affiliations include the West Olympia Rotary and has served on various committees for organizations throughout his community.
Aaron and his beautiful wife, Holly, a Registered Nurse, consider their greatest accomplishment having raised Thomas and Tate, their two intelligent and motivated sons. Their oldest son Tate is following in his father’s entrepreneurial footsteps and currently attends the Carson College of Business at Washington State University. Their beloved youngest son, Thomas, is a student at Olympia High School.
Focused on helping veterans and their families navigate the maze of long-term care solutions, Aaron specializes in customized strategies to avoid the financial crisis that care related expenses can create. Experience has shown him that many seniors are not prepared for the economic transition that takes place as they reach an advanced age.
With support from the American Academy of Benefit Planners – an organization with expertise and resources on the intricacies of government benefits – he helps clients close the gap between the cost of care and their income while protecting their assets from depletion.
Aaron can help you and your family to create, preserve and protect your legacy.
That’s making a difference.
Investment advisory services are offered through BWM Advisory, LLC (BWM). BWM is registered as an Investment Advisor located in Scottsdale, Arizona, and only conducts business in states where it is properly licensed, notice filed, or is excluded from notice filing requirements. BWM does not accept or take responsibility for acting on time-sensitive instructions sent by email or other electronic means. Content shared or published through this medium is only intended for an audience in the States the Advisor is licensed in. If you are not the intended recipient, you are hereby notified that any dissemination, distribution, or copy of this transmission is strictly prohibited. If you receive this communication in error, please immediately notify the sender. The information included should not be considered investment advice. There are risks involved with investing which may include market fluctuation and possible loss of principal value. Carefully consider the risks and possible consequences involved prior to making an investment decision.
Confidential Notice and Disclosure: Electronic mail sent over the internet is not secure and could be intercepted by a third party. For your protection, avoid sending confidential identifying information, such as account and social security numbers. Further, do not send time-sensitive, action-oriented messages, such as transaction orders, fund transfer instructions, or check stop payments, as it is our policy not to accept such items electronically. All e-mail sent to or from this address will be received or otherwise recorded by the sender’s corporate e-mail system and is subject to archival, monitoring or review by, and/or disclosure to, someone other than the recipient as permitted and required by the Securities and Exchange Commission. Please contact your advisor if there are any changes in your personal/financial situation or investment objectives for the purpose of reviewing/evaluating/revising our previous recommendations and/or services. Additionally, if you change your address or fail to receive account statements from your account custodian, please contact our office at [email protected] or 800-779-4183.
In a letter addressed...
Working for and retiring...
Free Retirement Benefits Analysis
Federal Retirement benefits are complex. Not having all of the right answers can cost you thousands of dollars a year in lost retirement income. Don’t risk going it alone. Request your complimentary benefit analysis today. Get more from your benefits.I want more