According to applicable federal law, Social Security benefits are evaluated on an annual basis and the benefits are then calculated based upon the cost-of-living as measured by the Department of Labor Consumer Price Index (DPI). An increase in the Social Security benefits based upon the higher costs for goods and services is referred to as the cost-of-living adjustment (COLA). The purpose of COLA is to help individuals pay for the additional increase in the cost of goods and services.
Approximately 70 million Americans receive Social Security benefits, including retirement income, Social Security Disability and Supplemental Security Income, also known as SSI. According to the Center for Retirement Research at Boston College, approximately 40% of all retired individuals rely on Social Security for at least one half of their income.
Social Security benefits will increase by 8.7% in 2023. According to the Social Security Administration, this will result in an average increase in Social Security benefits of almost $1,700.00 per year. This is greatest increase in Social Security benefits over the last 40 years.
Often when Social Security benefits are increased each year it is offset by the increase for the Medicare Part B premium. Fortunately the Part B premium will decrease in 2023.