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The Social Security Administration COLA

The Social Security Administration is set to announce the 8.7% cost-of-living adjustment (COLA). The 8.7% COLA will boost the average monthly Social Security retirement benefit to $1,814 next year, up $145 per month from this year’s $1,669 average benefit. The 8.7% COLA increase is the largest adjustment to the benefit in 40 years thanks to high inflation. And to everyone’s surprise, a decreased Medicare Part B premium comes with it.

First, let’s focus on Social Security and how they calculate the COLA and then how those both receiving the benefit and delaying the benefit are affected.

COLAs have been calculated based on the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers). After 1983, COLAs have been based on increases in the CPI-W from the third quarter of the prior year to the corresponding quarter of the current year in which the COLA became effective. The CPI-W measures the changes in consumer prices to which certain workers are exposed. All of that to say, we have seen higher inflation since the Covid-19 pandemic and Social Security must accurately adjust the benefit in accordance with that inflation.

If you are currently claiming

Now how does this affect those receiving the benefits? If you are receiving Social Security benefits then you will begin receiving the updated benefit amount including the COLA in January of 2023.

If you are not currently claiming

The good news is, everyone eligible for Social Security retirement benefits will receive credit for all of the Social Security COLAs that occur after they turn age 62, regardless of when they choose to start drawing their benefits. So, there’s no need to rush to file for Social Security before January, go ahead and stick with your financial plan

Medicare Part B Premiums Decline

When Social Security recipients got a Cost-of-Living Adjustment of 5.9% in 2022, they were met with a 14.5% increase in their Medicare Part B premium up to $170.10. This year, Medicare Part B premiums will be reduced by $5.20 to $164.90 a month. This is due to lower-than-expected Medicare spending for an Alzheimer’s disease drug.

In a year with a negative stock and bond market, Social Security recipients can see a glimmer of light with the cost-of-living adjustment and decreased Medicare Part B premiums. Remember, annual income affects Medicare Part B premiums as well.

If you have questions specific to your financial situation and how this might impact that, please feel free to reach out to your Whitaker-Myers Wealth Managers Financial Advisor.


October 13, 2022

Dustin Burkhart

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