Will Social Security Receive a Raise in 2023?

To some degree, Social Security payments can help insulate retirement incomes against inflation. For example, the cost-of-living adjustment (COLA) this year was 5.9 percent, due to the considerable inflation we saw in 2021. But with inflation continuing to accelerate, will we see an even larger COLA in 2023?

It’s possible. The Senior Citizens League has predicted that the COLA for 2023 could be as high as an 8.7 percent “raise” for retirees. But matters aren’t so simple. Here’s what you need to know about the possible historic increase in Social Security payments.

The Social Security Administration uses data from the third quarter of the year to determine the COLA for the following year. So while estimates have fluctuated, we don’t yet know exactly what the payment adjustment will be. It could be a bit less than predicted.

Also, taxation is a potential problem for some retirees. Social Security payments are not taxed unless your overall taxable income exceeds certain income thresholds. But with a 8.7 percent COLA representing a potentially large increase in checks, some retirees could find themselves exceeding those thresholds for the first time. Some of that income increase could be reclaimed by Uncle Sam in the form of income taxes.

Finally, COLAs are not always accurately calculated for a retiree’s budget. The Administration uses an inflation index that does not always adequately reflect the spending of the average retiree, because the index focuses on purchases made by working-age individuals. For retirees, things like housing and the cost of healthcare are much more impactful on their budgets.

So if inflation in those areas exceeds the average rate of inflation, retirees are disproportionately affected. Therefore, the increase in Social Security payments doesn’t necessarily account for the average retiree’s actual spending.

Still, a significant COLA could represent good news for many. For more information on keeping more of your income safe from things like taxes and inflation, let’s meet regularly to discuss your retirement plan.

About the Author: Mark Roberts

In addition to managing clients’ money and giving investment and diversification advice, Mark offers something that “the other guys” don’t - a unique approach to Retirement Tax Strategies and distribution. Time and time again, Mark meets with new clients who tell him they have a great relationship with their financial advisor but have never been offered information on this kind of approach to securing their financial futures. Mark has taken this feedback to heart and works tirelessly to ensure that his strategies focus on taxes and distribution. Mark started selling insurance for a major insurance company right out of high school to help put himself through college. After graduating with a degree in finance, he dove into estate planning on the financial side to set himself apart from other financial advisors. However, as changes were made to estate tax laws over time, Mark shifted his focus to income tax strategies. Mark’s philosophy is “the blue prints are more important than the wall paper or carpet.” The wall paper and carpet represent products like investments and insurance policies, whereas the blue prints represent the strategies. Once strategies that truly fit the client’s needs are put in place, our focus can shift to providing you with the right products. According to Mark, “It doesn’t matter what carpet we use if the walls are not in the right place.” Our approach to money management is designed to generate the largest alpha (quality) with the lowest standard deviation and beta (risk). By doing this, we help provide clients with the highest return on the lowest risk. Generating income for our retirees is also very important. Because withdrawing money from your portfolio hurts the account rather than helping it, our goal is to design income strategies to harm the portfolio the least making the money last longer.

Will Social Security Receive a Raise in 2023?

Will Social Security Receive a Raise in 2023?

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About the Author: Mark Roberts