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Huge Social Security Increase Coming in 2023: How Much Will Your Check Be?

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Finish the old, make way for the new. Many Americans will be happy to push past 2022 and start a new year. And they only have a week left before doing so.

Retirees, in particular, have an additional reason to celebrate the New Year. There’s a huge Social Security increase coming in 2023. How much will your check be?

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Know what your amount will be

The Social Security cost of living adjustment (COLA) for 2023 is 8.7%. Can you just add this percentage to your current monthly benefit to find out what your new benefit will be? It is not that simple.

The COLA is not actually applied to the benefits of Social Security beneficiaries. Instead, it is applied to each person’s primary insurance amount (PIA). The PIA is the benefit you would get if you started receiving Social Security retirement benefits at your normal retirement age. If you took early retirement, your monthly increase will be a little less than you expected.

One obvious way to find out what your new monthly benefit will be is to simply wait until January when you’ll receive your first Social Security payment for 2023. But there are ways to find out sooner.

The Social Security Administration (SSA) is sending COLA notices to all Social Security recipients this month. You may have already received your review. If this is not the case, you can access your personal “my social security” account online. Go to your account’s message center. A message should tell you the amount of your new benefit in 2023.

Meaningful averages

We don’t have to jump through any hoops to figure out what the average monthly Social Security benefit will be in the new year. The calculation is simple.

The average monthly Social Security benefit for retirees in 2023 will increase to $1,827. The average was $1,681 before the COLA of 8.7%. What about cases where both spouses are retired and receiving social security benefits? The average total monthly benefit for these couples will be $2,972 next year, up from $2,734 previously.

The maximum monthly benefit in 2023 for workers who retired at full retirement age will be $3,627. This maximum currently stands at $3,345.

Of course, the true maximum Social Security benefit can only be achieved by those who wait until they are 70 to retire – and who have had careers that have largely provided them with consistently high annual incomes. In 2023, the maximum monthly benefit will be $4,555 compared to $4,194 in 2022.

A few points to note

Some extra dollars may hit your bank account beyond the Social Security COLA each month next year. Medicare Part B premiums — which are automatically deducted from your monthly Social Security benefits — are decreasing in 2023. The standard Medicare Part B premium will be $5.20 lower next year.

On the other hand, it is possible that your large increase in Social Security could increase your income to a level where it is subject to higher federal taxes. You may also owe more state taxes, depending on where you live.

There is also no guarantee that the COLA will be enough to offset the rising cost of living. In fact, more than half of retirees who responded to a recent Motley Fool poll didn’t think the 8.7% raise would be enough.

Yet every person who receives Social Security benefits will receive at least a nominal increase. “Out with the old and in with the new” should be a good thing overall in 2023.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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