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How the 2023 COLA Affects Social Security Disability Benefits

Rising prices and wages change payments, income rules for SSDI and SSI beneficiaries

spinner image Middle aged disabled woman using a calculator at her desk
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Social Security’s annual cost-of-living adjustment (COLA) provides beneficiaries with a hedge against rising prices. That includes all beneficiaries — not just retirees and survivors, but also people who receive disability payments.

So, starting in January, people collecting Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI), the two types of payments Social Security administers for people unable to work due to a serious health condition, will get an 8.7 percent increase in their monthly benefits.

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The COLA tracks changes in consumer prices year to year and is applied to benefit amounts. Other measures that chart national trends in wage growth can also affect eligibility and payments for SSDI and SSI recipients. Here are some of the changes those groups will see in 2023.

SSDI benefit amounts

More than 7.7 million workers were receiving SSDI as of September, representing nearly 12 percent of all Social Security beneficiaries. Like retirement benefits, SSDI is paid out of payroll tax revenue that flows into Social Security’s trust funds, and eligibility and benefit amounts are determined by a worker’s earnings record.

According to the Social Security Administration (SSA), the 2023 COLA will increase the average monthly SSDI benefit for a disabled worker by $119, from $1,364 to $1,483.

About 1.25 million family members also receive SSDI on the earnings record of a disabled spouse, former spouse or parent. The average collective benefit for a disabled worker with a spouse and child (or children) receiving benefits on their record will increase in January from $2,407 a month to $2,616.

SSDI income limits

Because disability benefits are contingent on a person being largely unable to work, Social Security sets an income ceiling for SSDI recipients. Beneficiaries who exceed this cap on what the SSA calls “substantial gainful activity” (SGA) will, in most cases, lose their SSDI eligibility.

The SGA cap is adjusted annually based on the National Average Wage Index, an SSA measure of historical trends in U.S. wages. In 2023, most SSDI recipients can earn up to $1,470 a month from work without risk to their benefits, up from $1,350 the previous year. The cap is higher for beneficiaries who are blind: They can make up to $2,460 a month, a $200 increase from 2022.

Social Security offers several work incentives aimed at helping people with disabilities explore options for going back to work. One of these is a trial work period: An SSDI recipient can work, and earn any amount of income, for any nine months over a rolling five-year period without losing benefits. In 2022, the SSA counts a month toward your trial work period quota if you earned at least $970; next year, that goes up to $1,050.

SSI federal payments

Supplemental Security Income is distinct from traditional Social Security benefits — it is funded by general U.S. tax revenue, not Social Security payroll taxes, for one thing — but the SSA administers this safety-net program, delivering monthly benefits to nearly 7.6 million older, disabled and blind people with very low incomes and few financial resources.

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With the 2023 COLA, the maximum federal payment to an individual SSI recipient will go up from $841 a month to $914. (Most states provide supplemental payments to some SSI beneficiaries.) A married couple in which both spouses are SSI-eligible would receive up to $1,371 a month, up from $1,261 this year.

Most people applying for SSI are subject to the substantial gainful activity limits at the filing stage — if their work income exceeds the cap at that time they claim benefits, the claim will likely be denied. The SGA cap does not apply once an applicant has been approved for and is receiving SSI.

However, people getting SSI are subject to a different income limit. If they are working or receiving money from other sources such as government benefits, investments or family members, a portion of that income is deducted from their monthly SSI payment. If this “countable income” exceeds the 2023 federal payment standard of $914 for a single person and $1,371 for a couple, they will get no SSI benefit that month.

The COLA has an additional impact on some younger people receiving SSI on the basis of disability or blindness. Those regularly attending secondary school, college or university, or vocational or technical training can earn up to a certain amount from work each month and not have it count against their SSI benefit. In 2023, this “student earned income exclusion” increases from $2,040 to $2,220 a month, up to an annual maximum of $8,950 ($8,230 in 2022).

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