The tens of millions of Americans collecting Social Security and Supplemental Security Income (SSI) will get an 8.7% increase in 2023, a much-needed boost as record-high inflation rachets up.

The 8.7% cost-of-living adjustment (COLA) will be effective with benefits payable in January to about 70 million Social Security beneficiaries, according to the Social Security Administration. Also, the increased payments to more than eight million SSI beneficiaries will begin on December 30, an agency news release said, noting that some people receive both Social Security and SSI benefits.

“A Social Security COLA of 8.7% is rare—enjoy it now,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League.  “This may be the first and possibly the last time that beneficiaries today receive a COLA this high."

Johnson pointed out that there were only three other times since 1975, the start of automatic adjustments, that the COLA was higher—9.9% in 1979, 14.3% in 1980 and 11.2% in 1981.

The annual increase is tied to the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics, and some other adjustments that take effect in January of each year are based on the increase in average wages.

The BLS data showed that the CPI index rose 0.4% for the month of September and 8.2% from a year ago. Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $160,200, a release from the Social Security Administration said. That is up from $147,200.

For workers younger than the full retirement age of 66 or 67 (depending on their birth year), the release noted that their annual earnings limit will increase from $$19,560 to $21,240. And people reaching their full retirement age in 2022 will see their earnings limit increase to $56,520 from $51,960. The release added that there is no limit on earnings for workers who are at full retirement age or older for the entire year.

Johnson said the 8.7% COLA was eagerly anticipated due to inflation. The adjustment will increase the average retiree benefit of $1,660 by about $144, she said. “It’s too early to say how well the 8.7% COLA will keep pace with inflation in 2023,” she said.

“Without a COLA that adequately keeps pace with inflation, Social Security benefits purchase less over time, and that can create hardships especially as older Americans live longer lives in retirement,” she said.

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