50+ Lifestyles

Social Security Announces Big, Big COLA for 2023

By Richard J. Schillig, CLU, ChFC, LUTCF
Independent Insurance and Financial Advisor

The Social Security Administration has announced a 8.7% cost-of-living adjustment for 2023. This is the largest increase since 1981.

The cost-of-living adjustment, or COLA, is an increase to Social Security benefits. It’s meant to help offset the rising prices that could erode purchasing power.

This is good news coupled with the fact the Medicare Part B base premium will be reduced from $170 to $164 beginning January 2023. Consequently, we will see an increase in monthly Social Security Benefits.

Social Security COLAs are not guaranteed every year. COLAs have been paid in most years, but not when inflation is too low to trigger an increase.

7.54% COLA in 1983

5.8% COLA in 2009

5.9% COLA in 2022

8.7% COLA in 2023

no COLA in 2010, 2011, and 2016.

COLAs are officially announced each October and reflect any annual increase in the average Consumer Price Index for Urban Wage Earners and Clerical Workers, called the CPI-W. Specifically, the average CPI-W for the third calendar quarter of the current year is compared to the average CPI-W for the third calendar quarter of the last year a COLA was paid. Any percentage increase is the COLA. Emphasizing an 8.7% increase for 2023.

Prices rose sharply between the third quarter of 2021 and the third quarter of 2022, resulting in this year’s historic COLA, which will be applied to benefits in January 2023.

Although the latest COLA offers a big benefit boost, it may still not be enough to keep those relying on Social Security from feeling inflation’s pinch.

It is because of this increase in prices, stock market volatility and overall cost of living that we use the index annuity in planning for our clients. The index annuity, remember is linked to the performance of the gains in the stock market. Index annuities are not invested in the stock market but are ‘linked’ to the upside of the market…. not the downside of the stock market. That’s why I can say continuously “my clients have not lost money.” My clients have not lost money with the negative performance of the stock market this year and in year’s that market was negative; 2000, 2001, 2002, 2008, 2015, 2018 and of course this year.

Index annuity account values do not decline with the declines of the stock market. Index annuities are linked to the growth of the market. In those year’s that the stock market was a negative, my client account values did not decline.

During this month of December, we continue our virtual Community Meetings scheduled for Dec 13 & 15. Call Craig at 563.332.2200 for instructions on how to participate in these very informative meetings.

Richard J. Schillig, CLU, ChFC, LUTCF is an Independent Insurance and Financial Advisor with RJS and Associates, Inc. He can be reached at (563) 332-2200.