Annual cost-of-living adjustment rises as inflation surges

Social Security beneficiaries can expect an 8.7 per cent boost to benefits in 2023.

If you’re one of the approximately eight million Americans receiving Social Security disability benefits, chances are you’re celebrating right now.

The annual cost-of-living adjustment (COLA) – a change in your monthly benefit to ensure your purchasing power remains the same even when prices rise due to inflation – was announced last month. The good news is that Social Security recipients will be getting much bigger payments in 2023.

Owing to an 8.7 per cent cost-of-living adjustment for the new year – the largest increase since 1981 – Social Security checks will also increase by an average of about $145 per month.

While the COLA increase may seem meager to some, every single dollar makes a difference to American citizens with disabilities who are unable to work. They are set to feel the squeeze more than most as living costs continue to rise.

Jo Ann Jenkins, CEO of AARP, explained in a statement: “The guaranteed benefits provided by Social Security, including the annual COLA, are more crucial than ever, as high inflation remains a problem. The automatic adjustment is an essential part of Social Security that helps ensure the benefit does not erode over time due to rising prices.”

While beneficiaries won’t see the 2023 COLA in their benefit checks until January 2023, they will be able to view the amount they can expect to receive in the new year as early as next month online.

In further good news for American citizens with disabilities, the standard monthly Medicare Part B premium will drop by 3 per cent next year to $164.90, down $5.20 from $170.10 in 2022, according to the Centers for Medicare & Medicaid Services. This payment is often deducted directly from Social Security benefit checks.

White House Press Secretary Karine Jean-Pierre is among those espousing the changes to Medicare. Jean-Pierre said in a statement that Americans receiving disability benefits “will have a chance to get ahead of inflation, due to the rare combination of rising benefits and falling premiums. We will put more money in their pockets and provide them with a little extra breathing room.”

Overall, this is a hugely positive development for the more than eight million Americans who receive disability payments from the Social Security Administration, be it through Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).

Overall, this is a hugely positive development for the more than eight million Americans who receive disability payments from the Social Security Administration, be it through Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI).

However, there are a few caveats to consider – namely, that Social Security benefits are taxable. Make no mistake: taxes on Social Security benefits apply to single taxpayers with $25,000 or more in combined income and married taxpayers with $32,000 or more in combined income.

Because of the higher COLA in 2023, some Social Security beneficiaries will be pushed above the income limit while, for those already in the taxable bracket, a substantial COLA in 2023 will leave them staring at a bigger tax bill come 2024.

It’s also worth noting that while 2023 marks a record-high COLA, increases won’t be as substantial in future years. If inflation subsides, the COLA will also decrease.

Furthermore, the Social Security program isn’t without its flaws. Last year, costs exceeded income by $56 billion, which is a worrying trend that looks set to continue. If an estimate by the board of trustees is to be believed, Social Security’s trust funds will have run dry by 2035.

That being said, officials still have 12 years to solve this problem. The good news is that, for now, the record 8.7 per cent Social Security COLA will help disabled people and people with long-term health conditions keep up with inflation.

Applying for Social Security disability benefits isn’t easy, but you don’t have to go it alone. Sampson Dunlap LLP is here to help.

Sampson Dunlap has specialized in Social Security disability claims for over 30 years. We know how to file your Social Security application in the most likely way to have benefits approved for you.

We understand that dealing with a disability is hard enough as it is and will fight from start to finish to help you secure the disability benefits you need and deserve. Don’t delay: speak to Sampson Dunlap today. We look forward to hearing from you.