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Your Social Security payment typically is adjusted annually for inflation to ensure that the purchasing power of benefits is not eroded by rising prices. This cost-of-living adjustment, or COLA, tracks inflation using a government measure of consumer prices for a variety of household goods and services.
Benefits go up if there is a measurable increase (at least 0.1 percent) in this price index from year to year. For 2023, the cost-of-living increase will be 8.7 percent, boosting the average benefit for a retired worker by $146 a month starting in January.
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That rise, fueled by a spike in prices for many goods in the wake of the COVID-19 pandemic, is the largest since 1981. The COLA was 5.9 percent in 2022, 1.3 percent in 2021 and 1.6 percent in 2020.
Keep in mind
- A COLA increase is not guaranteed. If there is no inflation in a given year, there will be no cost-of-living adjustment to benefits the following year. This has happened a handful of times, most recently in 2016.
- When there is a cost-of-living increase, you might not see all of it in your benefit payment. If your Medicare Part B premiums are deducted from your Social Security, as is the case with 70 percent of Part B enrollees, a Medicare rate increase could offset the COLA. However, 2023's large COLA increase will be accompanied by a rare drop in Part B costs.
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