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2023 Social Security Cost of Living Adjustment and Medicare Part B Premium Decrease

2023 Social Security Cost of Living Adjustment and Medicare Part B Premium Decrease

October 31, 2022

On October 13th, the Social Security Administration announced that the annual Cost of Living Adjustment (COLA) for benefits paid and wages subject to payroll taxes will increase by 8.7% in 2023.  This is a 2.8% increase over the 5.9% increase recipients experienced in 2022.  The COLA will go into effect for Social Security benefits being paid in January of 2023.

For those still working, the COLA increases the amount of earnings that are subject to FICA taxes, which fund both Social Security and Medicare.  Employers and employees each pay 7.65% of wages to fund Social Security and Medicare (self-employed individuals pay both the employer and employee share).  The 2023 COLA will increase the maximum amount of wages subject to the 6.2% portion of the FICA tax that funds Social Security from $147,200 in 2022 to $160,200 in 2023.

The remaining 1.45% of the FICA tax is used to fund Medicare and applies to all earnings, even those above the Social Security limit of $160,200.  Married couples filing jointly who make in excess of $250,000 and individuals who earn more than $200,000 pay an additional 0.09% in Medicare taxes- this is the same as in 2022.

The COLA also means the average retirement benefit will increase by $146, from $1,681 per month up to $1,827 per month.  The maximum retirement benefit for someone who retires at “full” retirement age in 2023 will increase from $3,345 to $3,627.  

In a piece of welcome news for many, Medicare Part B premiums are set for a slight decrease, with standard premiums dropping by $5.20, from $170.10 to $164.90.  Those that are subject to the Income-Related Monthly Adjusted Amounts (IRMAA), will also see their adjusted premiums decrease as well.

If you have any questions regarding the impact to your unique situation regarding the 2023 Social Security Cost of Living Adjustment, or the decrease in Medicare Part B premiums, please feel free to contact our office.  We always stand ready to help our trusted clients and friends as we all “Move Life Forward.”