Since 1975, the Consumer Price Index for Urban Wage Earners and Clerical Workers has automatically adjusted Social Security benefits each year to reflect changes in inflation. So how is this done you may wonder. The average CPI-W for the third quarter of this year compared to the same period last year, according to the Social Security Administration.

When controlling spending, the COLA increase prevents retirees from being truly dependent on a “fixed income,” according to Rob Williams, managing director of financial planning at Charles Schwab, who was speaking to CNET.

Because of the recent inflation and economic concerns, many are becoming curious as to what their COLA will be come the next year 2023. If you also fall into this category, this article is for you. Apart from providing information on what the COLA will be, we will also talk about what the Social Security Cost of Living Adjustment (COLA) is and how it affects you personally.

• What Is a Cost-of-Living Adjustment (COLA)
• How Does the Cost-of-Living Adjustment (COLA) Work?
• What will your Social Security Cost of Living Adjustment (COLA) be in 2023?
• Does Everyone Get the Full Social Security Cost-of-Living Adjustment?
• Who Will Receive COLA Checks?
• Who is the COLA Payment For?
• What is the $16728 Social Security Bonus?
• What is the Minimum Social Security Payment?
• What Is the Minimum Social Security Benefit at Age 62?
• What Should you Know About Social Security?
• What is the Average Social Security Check at 65?
• Are Seniors Getting Extra Money in 2023?
• How do I Get $144 Back on my Social Security Check?
• Do you Pay Taxes on Social Security?
• At What Age is Social Security no Longer Taxable?
• Is it Better to Take Social Security at 62 or 67?
• What is the Average Monthly Retirement Income?

What Is a Cost-of-Living Adjustment (COLA)

A cost-of-living adjustment (COLA) is a rise in Social Security and Supplemental Security Income (SSI) that is provided to offset the impacts of inflation, which is the rise in prices across the economy.

Read Also: Tax Brackets Versus the Fixed Tax Rate

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) for a certain time period is commonly used to calculate COLAs. The average cost of a selection of commodities is represented by the Consumer Price Index (CPI), which is used to calculate inflation.

A person who got $10,000 in Social Security benefits in 2022 would receive $10,870 in annual payments in 2023 due to the 8.7% COLA.

How Does the Cost-of-Living Adjustment (COLA) Work?

Since there was a lot of inflation in the 1970s, COLAs were used to offset it in contracts relating to compensation, real estate, and government benefits. The Social Security Administration (SSA) uses the CPI-W, which is determined by the U.S. Bureau of Labor Statistics (BLS), to calculate COLAs.

Applying the percentage rise in the CPI-W from the third quarter of one year to the third quarter of the following year yields the COLA formula. The SSA website routinely updates this information.

Congress ratified a COLA provision to offer automatic yearly COLAs based on the annual increase in the CPI-W that went into effect in 1975. Before 1975, Social Security benefits were increased when Congress approved special legislation. In 1975, COLAs were based on the increase in the CPI-W from the second quarter of 1974 to the first quarter of 1975.

From 1976 to 1983, COLAs were based on the increases in the CPI-W from the first quarter of the previous year to the first quarter of the current year. Since 1983, COLAs have been dependent on the CPI-W from the third quarter of the previous year to the third quarter of the current year.

Inflation rates throughout the 1970s ranged from 3.3% to 11.3%. The inflation rate was 9.1% in 1975, and the COLA rise was 8%. In 1980, when inflation was 13.5%, the COLA was at its highest ever level of 14.3%. Small COLA increases, averaging 2% to 3% annually, were motivated by significantly lower inflation rates during the 1990s. Even lower inflation rates in the early 2000s resulted in no COLA adjustments in 2010, 2011, and 2016.
In contrast to 1.3% in 2021 and 5.9% in 2022, the COLA for 2023 is 8.7%.

What will your Social Security Cost of Living Adjustment (COLA) be in 2023?

Social Security benefits are set to rise by 8.7% next year – the fourth-biggest increase since automatic inflation adjustments were introduced in 1975. 

The average monthly check that retirees will receive in January will increase by $146 to $1,827 as a result of this cost-of-living adjustment, or COLA, the Social Security Administration announced on Thursday.
That adds to the 5.9% COLA increase from the previous year, which was the highest increase since 1982.
Prior to that, COLA grew by an average of 1.7% per year between 2010 and 2020.

Based on the average yearly increases in the consumer price index for urban wage earners and clerical workers from July through September, the government determines the COLA adjustment. The broad index that the Labor Department produces each month is mostly reflected in that index.

The Labor Department stated on Thursday that the index increased to 8.5% in September.

According to several polls by the Census Bureau, roughly half of Americans aged 65 or older reside in homes where Social Security benefits make up 50% of their income. One-quarter of them receive at least 90% of their income from Social Security.

According to Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, these Americans, who often have lower incomes and don’t have pensions, won’t see any difference as a result of the COLA rise.

This won’t be a major game changer in any way, she declared. “We’re discussing purchasing new spectacles or even getting new tires for the automobile for the winter.”

Does Everyone Get the Full Social Security Cost-of-Living Adjustment?

Based on how inflation has affected the market during the past sixteen or so months, the COLA for the following year may be of historic proportions. Energy resources have seen a rise in price following Russia’s invasion of Ukraine, but not for the reasons many people believe.

In addition, corporations have used the geopolitical issue as a cover to raise prices for consumers due to increasing worldwide demand following import restrictions on Russian oil and gas by various nations. President Biden has chosen to rely on the national strategic reserve because the federal government lacks the authority to compel businesses to raise production. This is an incredibly unsustainable solution, especially when exports reach record highs, if the war drags on indefinitely.

Senior persons, many of whom are on fixed incomes, have been disproportionately impacted by these actions taken by energy firms. This comes as the Senior Citizens League (SCL) notes that seniors have lost around 40% of their spending power since the early 2000s, even with the annual COLA.

Who Will Receive COLA Checks?

You can anticipate receiving your first 8.7% cost-of-living adjustment check as a beneficiary of Supplemental Security Income in just over two weeks, at the end of December. (The first check for everyone else receiving Social Security benefits will be issued in January 2023.) In addition to the check you have received at the start of December, this payment is also made. You’ll learn why you’re receiving two checks this month down below.

Uncertain about the benefit increase you will receive? For a notice regarding your new benefit amount, check the message center in your My Social Security account. Watch for a letter in the mail with all the information regarding your raise if you missed the Nov. 15 deadline for opening an account.

When disbursing monthly payments, the Social Security Administration has a set timetable that it adheres to. Payments for SSI recipients are typically given out on the first of every month.

Your payment may not be received on the first of the month for one of two reasons: if a holiday or weekend falls on the regular payment day.

The first day of the month in January 2023 is a holiday and a weekend. When this occurs, the government mails the checks ahead of time on the following working day, in this example a Friday. As a result, you will receive your January 2023 check in December rather than January.

If you receive SSI, you’ll get a payment on Dec. 30 with your new benefit amount. Since your first increased payment is scheduled for Jan. 1 (a holiday and weekend day), you’re getting your first 2023 payment early. 

Who is the COLA Payment For?

Based on their past wages, people 62 and older may be eligible for Social Security benefits. Blind people and those with disabilities are also eligible. Families of people who qualify may also get Social Security payments.

Anyone who receives Social Security payments will have their credits adjusted for cost of living. Don’t anticipate having extra cash each month as the raise is intended to counteract the rising cost of consumer goods and services.

One of the most common misconceptions regarding Social Security, according to tax professionals, is that it is not taxed. However, Social Security is taxable, just like other government payments. This is how it goes:

• Single filers making $25,000 or less, or couples making $32,000 or less pay no taxes on their Social Security benefits.
• Single filers making between $25,000 and $34,000, and couples making between $32,000 and $44,000, pay taxes on up to 50 percent of their benefits.
• Single and joint filers making above those thresholds pay taxes on up to 85 percent of their benefits.
• An easy way to remember this: 15 percent of Social Security benefits — roughly $3,200 in 2023 — will always be tax-free.

A number of recipients who are already near certain levels of income — including any wages, interest from certain investments, plus Social Security — may get pushed into higher tax thresholds because of the COLA increase.

What is the $16728 Social Security Bonus?

You can get a bonus of up to $16,728 per year so that your Social Security payment check increases every month.

To have a decent Social Security, it can be essential to understand the retirement options in the US. If you are aware of several tricks that significantly enhance your Social Security checks, the amount of money you can receive each month is higher. Although the information is completely open to the public and neither secret nor hidden, not everyone is aware of all the specifics.

These methods only function when you have not yet begun taking retirement benefits. No monthly payment can be altered once you begin receiving your Social Security retirement income. All you can do is wait for the new bill’s $200 monthly raise and the COLA hike to go into effect.

Checking all angles is required to uncover the secret behind the increase in the Social Security payout. The retirement age is the first of these factors. A 30% reduction in the overall benefit is available if you reach an Early Retirement Age (ERA). In other words, if you made $1,000 in total contributions toward your pension, you would receive a check for $700 per month.

The ideal age is 67 to receive a benefit of 100% of the money you have amassed. You will receive your full pension after you reach Full Retirement Age (FRA). The growth, though, continues. You must work until you are 70 years old if you want to receive a higher monthly benefit. Each year worked after age 67 will add an amount to your Social Security benefit.

What is the Minimum Social Security Payment?

A minimum PIA known as the special minimum Social Security benefit was established in 1972 to provide benefits to a select group of low-income workers. The special minimum benefit is specifically intended for those with lower lifetime earnings overall. These rewards are determined according to service years, not income.

To qualify, low-income workers must have had coverage for at least 11 years. Any year in which a worker made a sizable contribution to the Social Security Trust Fund is considered a year of coverage. Worker coverage must span at least 30 years in order to get the full special minimum PIA.

For those claiming the Social Security special minimum benefit in 2022, the primary insurance payment varies from $45.50 for those with 11 years of coverage to $950.80 for those with 30 years of coverage. The maximum family benefit is in the range of $69.40 to $1,427.90.

Workers with lower lifetime salaries have historically received the Social Security special minimum benefit. The purpose of this benefit is to assist those employees in receiving a bigger Social Security payment than they may otherwise be eligible for based on their earnings. Less than 50,000 Americans received the special PIA as of 2019, the most recent year for which statistics were available, indicating that this computation is less frequently used.

The key justification is that Social Security benefits are often worth more when calculated using the regular PIA method. Instead of utilizing the wage index to determine adjustments, the special minimum PIA is modified using price-based inflation. The special minimum Social Security payout is typically lower than what ordinary Social Security pays as a result.

The expected average monthly payment from Social Security for retired workers, for instance, is $1,657 as of January 2022. Included in this is a cost of living adjustment of 5.9%. The anticipated average benefit payment for a married couple is $2,753. The usual calculations would probably result in a higher benefit for a low-income worker retiring today than the special minimum benefit formula would yield.

What Is the Minimum Social Security Benefit at Age 62?

The amount of money you receive from Social Security may be lessened if you begin receiving benefits at age 62, the earliest age at which you are eligible to do so, rather than at full retirement age. You would get a sum equal to your full entitlement to retirement benefits, less a 30% cut.

Therefore, if you start receiving benefits at 62 but your full retirement payout is $1,000 at age 67, you would receive $700 per month instead. The Social Security Administration normally makes changes to benefits permanent, so you don’t get this money back later. So, if you start receiving Social Security benefits earlier in life, it will permanently lower the amount you are eligible to receive. However, you would continue to be qualified for yearly cost of living adjustments.

On the other side, waiting longer to claim benefits may result in a higher benefit amount. A $1,000 monthly payout would become $1,240 per month if you choose to postpone receiving benefits up until age 70, the oldest age at which you are permitted to do so. This is due to the fact that you receive 8% more in benefits for each year you postpone reaching full retirement age.

The recipients of the special minimum benefit are likewise subject to the benefit decrease. Therefore, if you were qualified for the full $950 benefit for 2022 but chose to retire at age 62, your benefits would be reduced to $665. It’s critical to comprehend how your total financial situation in retirement may be affected by accepting Social Security payments early or deferring them.

What Should you Know About Social Security?

In order to provide eligible American employees with retirement income, the Social Security program was created in 1935. Later, it was extended to include the majority of the workers in the nation. It continues to serve as America’s pension plan and the financial safety net that many individuals rely on to maintain their standard of living in old age.

42% of elderly women and 37% of senior men receive at least 50% of their income from Social Security. It accounts for at least 90% of the income for 12% of senior men and 15% of elderly women.

Below are 10 things you should know about Social Security.

1. When Am I Eligible?

You may be able to get full retirement benefits as early as age 65 or as late as age 67, depending on when you were born.

• If you were born before 1938, your full retirement age is 65.
• If you were born from 1938 to 1942, the age ranges from 65 and two months to 65 and 10 months.
• If you were born from 1943 to 1954, it’s 66.
• If you were born from 1955 to 1959, it ranges from 66 and two months to 66 and 10 months.
• If you were born in 1960 or later, it’s 67

Although you can choose to start receiving Social Security as early as age 62, doing so will permanently limit your monthly benefits. For instance, if you begin receiving benefits at age 62 but are eligible to retire at age 66, your benefits will be reduced by 25%.

Up until age 70 (for those born in 1943 or later), when benefits are at their maximum and there is no longer any incentive to delay signing up for benefits, you will receive a larger benefit if you wait to start receiving them until your full retirement age: 8% for each year.

2. How Is Eligibility Determined?

The credits you accrue over your working years determine your Social Security eligibility. Starting in 2022, you can receive one credit up to a total of four each year for every $1,510 you earn. That increases to every $1,640 you earn in 2023. If you were born in 1929 or later, you must have 40 credits, which is equivalent to 10 years of full-time employment, in order to be eligible for Social Security benefits when you retire.

3. How Much Do I Pay In?

Workers will be required to contribute 6.2% of their salary, up to a maximum of $147,000 in 2022 ($160,200 in 2023), to Social Security. Employers also contribute 6.2%. Individuals who are self-employed must pay both portions, or 12.4%.

4. How Much Will I Get?

Your lifetime earnings are used to determine your Social Security benefits. The formula averages your 35 years of best earnings, which is a little difficult. You can use the Social Security Retirement Estimator online to get a ballpark estimate of what you would get if you have already accrued 40 Social Security credits.

5. Can I Get Social Security If I Work?

Yes, you can work and still receive Social Security payments. When you reach full retirement age, you are able to work as much as you want and still be eligible for all benefits. Your benefits are temporarily lowered if you are not fully retired. But the money is not wasted. When you reach full retirement age, Social Security will record it on your record, increasing your payout.

For people under the full retirement age, the cut is $1 for every $2 of earned income exceeding $19,560 in 2022 ($21,240 in 2023). Your benefits will be lowered by $1 for every $3 of income beyond $51,960 in 2022 ($56,520 in 2023) during the year you reach full retirement age. That persists up to the month you become fully eligible.

6. How Does the Spousal Benefit Work?

The Bipartisan Budget Act of 2015 tightened several spousal benefit regulations and eliminated many methods that married couples had previously utilized to enhance their payouts. However, depending on their partner’s record, spouses are still eligible to apply for benefits regardless of whether they have ever held a paid job. The non-working spouse must be at least 62 years old in order to be eligible, and the spouse with a work history must already be receiving retirement or disability payments.

If the spouse who is not working begins to get Social Security benefits before reaching full retirement age, the benefits for the non-working spouse will be permanently decreased, just like with other benefits. The non-working spouse can get a spousal benefit equal to up to 50% of their partner’s full retirement benefit if they wait until full retirement age.

Unless they also had a job and the benefit they’ve earned from their income is larger, bereaved partners are now eligible for 100% of their entire benefit. With a few exceptions, the widowed spouse must typically be at least 60 years old to collect benefits from the deceased spouse’s record. If the surviving spouse chooses to accept benefits before reaching full retirement age, the amount will also be lowered.

The benefit of the departed spouse will also be lost if the surviving spouse marries again before turning 60. On the basis of the record of their ex-spouse, divorced spouses may occasionally also qualify for spousal benefits.

7. Do I Owe Taxes on Social Security?

Depending on your salary, you might. If a couple files a joint tax return and has combined income between $32,000 and $44,000, up to 50% of their benefits will be subject to income tax. 85% of their benefits may be subject to taxation if their combined income exceeds $44,000.

Adjusted gross income plus any nontaxable interest and half of your Social Security benefits is referred to as combined income. These income requirements are $25,000 to $34,000 for individuals for 50% and more than $34,000 for 85%.

8. How Do I Apply for Benefits?

You have three options for applying: in person, over the phone (1-800-772-1213), or online. You will be required to submit specific details and perhaps some supporting documentation, like a birth certificate. The entire list is on Social Security Form SSA-1.

9. How Does the Social Security System Work?

Pay-as-you-go refers to the Social Security system. The benefits for existing retirees are funded by money contributed by current employees (through their taxes). Any money that is left over is placed in the Social Security Trust Fund, which will be utilized in years to come when current payments won’t be enough to meet the program’s obligations in full.

There are two trust funds: the Disability Insurance (DI) Trust Fund and the Old-Age and Survivors Insurance (OASI) Trust Fund, which provides retirement benefits. The trust funds’ monies must be legally invested in U.S. government securities.

10. Is Social Security in Trouble?

Without a doubt, the Social Security program faces some budgetary difficulties. As fewer workers are contributing to the system for every retiree taking money out of it, the ratio of current workers to retirees is decreasing. People are also receiving benefits for longer periods of time since they are living longer than they did when the program was first imagined in the 1930s.

The cost of the retirement program exceeded its income for the first time in 2021, according to SSA trustees. The program should be able to provide full payments up until 2034, when the trust fund will run out, according to current forecasts. 77% of the scheduled payments will then be paid using ongoing tax income as the fund’s reserves run out.

Given the program’s popularity and importance to millions of Americans—and the millions of older Americans who have already paid into it for decades—it’s extremely unlikely that Congress would simply let it fail.

What is the Average Social Security Check at 65?

Although 65 has been regarded as the traditional retirement age in the United States throughout the majority of the 20th century, few people actually leave the workforce at that age. According to a Forbes article that used statistics from the Boston College Center for Retirement Research, the average retirement age in the U.S. in 1992 was 62 for men and 59 for women.

Since that time, the typical retirement age has crept up on the previous average. Nine years later, the average retirement age had increased to 64 for males and 62 for women, from 63 and 60, respectively, in 2001. The typical retirement age in 2021 was 62 for women and 65 for men.

Of course, you are not required to begin receiving Social Security payments at age 65 just because you retire at that age. You can hold off until the age of 70, which is what many Americans choose to do because the longer you hold off, the larger your monthly payment will be.

According to the Social Security Administration, the average payment for people who begin receiving Social Security benefits at age 65 will be around $2,484 per month in 2022. Based on the agency’s estimate, Social Security claimants over 65 receive an average annual benefit of $29,806. In 2023, it is anticipated that the average annual benefit for 65-year-olds will increase to $30,708, or $2,559 a month.

These figures are significantly greater than the average monthly benefit for all Social Security recipients, which, according to the SSA, was $1,546.59 as of August 2022. Numerous factors contribute to the discrepancy, including the fact that claimants under the age of 65 sometimes receive lesser payouts.

In terms of current money, average benefits for people over 65 have been rising for a few decades. However, if you account for inflation, the payments have been declining recently. The estimated average annual benefit for beneficiaries 65 and older, in constant 2001 dollars, is as follows:

• 2020: $15,313
• 2021: $15,269
• 2022: $15,230
• 2023: $15,189
• 2024: $15,142

Although the SSA provides recipients with yearly cost-of-living adjustments, the adjustments aren’t always successful in reducing the actual inflation rate. Take 2022 as an example, when the COLA is 5.9% but the actual inflation rate has been above 8% for the majority of the year.

The AARP advises using its own Social Security Benefits Calculator or checking your online My Social Security account if you are close to retirement age and wish to estimate your Social Security benefits. The estimate in the latter choice is based on your SSA-recorded earnings history. You must enter your yearly median salary into the AARP calculator.

Are Seniors Getting Extra Money in 2023?

If a new plan recently submitted to Congress is passed, Social Security recipients might receive an extra $2,400 in payments each year. Seniors would undoubtedly appreciate this since rising inflation has eliminated their annual cost-of-living adjustments.

According to CBS News, U.S. Rep. Peter DeFazio (D-Ore.) and U.S. Sen. Bernie Sanders (I-Vt.) introduced the Social Security Expansion Act on June 9. The bill would add $200 to each monthly payment for everyone receiving Social Security benefits now or who will reach 62 in 2023. The bill is appropriate for a few reasons.

First of all, it comes in response to the Social Security Administration’s earlier this month’s news that Americans will no longer receive their full Social Security benefits in around 13 years without actions to bolster the program.

Additionally, it occurs during a time of historically high inflation, which has a significant impact on seniors living on fixed incomes—many of whom rely only on Social Security benefits—and is especially severe for them. The 5.9% Cost-of-Living Adjustment (COLA) for Social Security this year is calculated using inflation data from 2021. However, since then, inflation has risen far above 8%, which means that Social Security beneficiaries today are actually losing money.

By increasing each recipient’s monthly check, the new legislation seeks to reduce the burden on their finances. Given that the typical monthly Social Security benefit is $1,658, an increase of $200 would amount to a 12% increase.

The National Association of Registered Social Security Analysts’ president, Martha Shedden, stated that “many, many seniors rely on Social Security for the bulk, if not all, of their income.” “For many people, $200 a month can make a big impact.”

The bill would increase the monthly payment in addition to altering the program in a number of ways. One would be to use the Consumer Price Index for the Elderly (CPI-E) rather than the Consumer Price Index for Urban Wage Earners and Clerical Workers as the basis for the annual COLA (CPI-W).

Another adjustment would be to apply the Social Security payroll tax to all incomes over $250,000 in order to increase financing. Earnings now over $147,000 are exempt from the Social Security tax.

Observers anticipate that Social Security will undergo some sort of reform to ensure that it continues to meet the demands of beneficiaries long after the measure in its current form is rejected by Congress.

Changes will be made, Shedden declared with confidence. “I’m not sure if this is the bill that will pass, but it’s getting closer,”

How do I Get $144 Back on my Social Security Check?

When you enroll in Medicare Part B, you are required to pay a $164.90 monthly premium. The giveback benefit, also known as a reduction in your Part B premium payment under Part C Medicare Advantage (MA) coverage, occurs when this happens. Your reduction might be anything from the full premium amount to less than $1.

Although the monthly premium is less expensive, you don’t actually receive a refund. Instead, you simply pay the discounted amount, which allows you to avoid paying the whole cost.

Your payment will be smaller if your premium is deducted from your Social Security benefit. The giveback benefit would be credited to your monthly statement if you choose not to pay that way. You would only pay the amount that includes the giveback benefit, not the entire $164.90.

For instance, if your monthly payment is normally $164.90 but your MA plan’s giveback benefit is $50, you do not receive $50 per month. Instead, you would pay just $114.90 a month and keep the extra $50 in your pocket. You wouldn’t need to pay a Part B monthly fee if your insurance plan gives a complete $164.90 reimbursement.

You may qualify for a premium reduction if you:

• Are enrolled in Part A and Part B
• Do not rely on government or other assistance for your Part B premium
• Live in the zip code service area of a plan that offers this program
• Enroll in an MA plan that provides a giveback benefit

Because not all plans offer this benefit, it’s important to do your research and compare plans, benefits, and costs to ensure you’re making the best decision for you.

If you sign up for a plan that provides a giveback benefit, you’ll find information about the Part B premium buy-down in the plan’s summary of benefits or evidence of coverage (EOC). You can check how much of a discount you’ll receive here. or get in touch with the plan directly.

It’s crucial to understand that you simply pay the lower premium amount; there is no reimbursement. Your Social Security payments will reflect the decreased amount, and because less is deducted for the premium, your SS checks will be larger than they were previously. The processing of your premium rebate by Social Security, however, could take up to 3 months. You’ll notice a rise in the size of your check after that point.

There are a few things to be aware of when thinking about enrolling in an MA plan that offers the giveback benefit, even though it can help you save money.

• Availability. One of these plans may not be available in your area.
• Possible reduction in benefits. MA plans cover everything Original Medicare does and more, typically including coverage for things like routine dental, vision, and hearing. However, some plans that offer a premium reduction benefit eliminate those other benefits to make up for the lower premium. You should weigh the loss of these benefits with the premium savings you’d get.
• May not save you money in the long run. Plans that offer a premium reduction may have a higher annual deductible, co-pays, or co-insurance. They may also have a smaller network of providers, and you’d have to pay more to see someone out-of-network.
• Givebacks vary. While you could get a premium reduction of the full $164.90, it could also be as low as $1. That may not be worth it depending on the other costs and benefits offered or not offered by the plan.
• Giveback amounts could change. MA plans are offered by private insurance companies that set their own fees and costs, and they can (and usually do) change them each year. This means the premium reduction could also change from year to year.

Do you Pay Taxes on Social Security?

You must pay taxes on up to 85% of your Social Security benefits if you file a:

• Federal tax return as an “individual” and your “combined income” exceeds $25,000.
• Joint return, and you and your spouse have “combined income” of more than $32,000.

If you are married and file a separate return, you probably will have to pay taxes on your benefits.

At What Age is Social Security no Longer Taxable?

As a person ages, the rules for taxation benefits remain constant. The amount of your income, precisely what the Internal Revenue Service refers to as your “provisional income,” determines whether or not your Social Security benefits are taxed.

A person’s provisional income is their total of their adjusted gross income (line 11 on their 1040 tax form), tax-free interest income, and half of their Social Security benefits. No matter your age, you must pay federal taxes on a part of your benefits if they total more than $25,000 for a single person and $32,000 for a married couple filing jointly.

This covers retirement benefits as well as spousal, survivor, and disability benefits.

Supplemental Security Income — monthly cash assistance for low-income disabled, blind and older people that is administered but not funded by Social Security — is not taxable.

Is it Better to Take Social Security at 62 or 67?

As early as age 62, you can begin receiving Social Security retirement payments. When you reach full retirement age, however, you are eligible for all benefits. Your benefit amount will increase if you wait until you are 70 years old before claiming your benefits.

For every month before your full retirement age that you begin receiving benefits, your benefits will be cut by a modest percentage.

There are advantages and disadvantages to taking your benefit before your full retirement age. The advantage is that you collect benefits for a longer period of time. The disadvantage is your benefit will be reduced. Each person’s situation is different. It is important to remember:

• If you delay your benefits until after full retirement age, you will be eligible for delayed retirement credits that would increase your monthly benefit.
• That there are other things to consider when making the decision about when to begin receiving your retirement benefits.

What is the Average Monthly Retirement Income?

The typical average retirement income for retirees 65 and older is $47,357, according to data from the U.S. Census Bureau. $73,228 is the average mean annual retirement income.

To better comprehend the average retirement income, these data are divided into median and mean. The most recent data is from 2019, which is current. Even though the details of the economy in 2020 or 2021 are not reflected in this data, it depicts a fairly accurate reality for American households.

Age Range	Median Household Income
55-64	$75,842
65+	$47,620

It can be challenging to estimate how much monthly retirement income you’ll need because it depends on so many different things. Age at retirement, health, and way of life are all important factors, of course. However, in general, most experts concur that in order to maintain your quality of life in retirement, you would need between 70 and 80 percent of your pre-retirement income.

For instance, you would require between $35,000 and $40,000 per year in retirement if your pre-retirement income was $50,000 per year ($4,167 a month). Of course, this is only a general example.

Your circumstances may have a greater or lesser impact on your real needs. For instance, if you are generally healthy and young, you might be able to get by on a lower income than someone who is older and has health problems. On the other hand, if you have an active lifestyle and enjoy traveling, you could require more than someone who is content to stay at home.

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The amount of money you’ll require in retirement might be calculated in a number of different ways. The “50-30-20” rule of thumb is one approach. According to this formula, you should set aside 20% of your income for savings, 30% for non-necessary/discretionary costs, and 50% for essential needs. This line of thinking can be a helpful place to start, but keep in mind that your actual demands may vary and that it is only a broad guideline.

Use the “80% rule” as a second method of estimating your retirement income needs. According to this concept, in order to maintain your quality of life in retirement, you will need 80% of your pre-retirement income. If you are unsure, this estimate is more conservative than the 50-30-20 guideline, but it can be a decent place to start.

The average retirement income for each state is displayed in data made public by the U.S. Census Bureau. According to region, we’ve provided the averages for each state. We also dissected which states have the highest and lowest average retirement incomes to provide a more comprehensive picture of retirement income in the United States.

Northeast:

• Connecticut: $32,403
• Maine: $24,487
• Massachusetts: $31,838
• New Hampshire: $26,376
• New Jersey: $30,906
• New York: $30,839
• Pennsylvania: $24,257
• Rhode Island: $27,027
• Vermont: $24,962

Midwest:

• Illinois: $30,950
• Indiana: $20,521
• Iowa: $22,198
• Kansas: $22,998
• Michigan: $24,609
• Minnesota: $27,087
• Missouri: $24,321
• Nebraska: $23,519
• North Dakota: $24,769
• Ohio: $25,972
• South Dakota: $23,101
• Wisconsin: $25,100

South:

• Alabama: $25,004
• Arkansas: $23,031
• Delaware: $32,289
• District of Columbia: $43,601
• Florida: $29,582
• Georgia: $28,560
• Kentucky: $24,222
• Louisiana: $25,947
• Maryland: $35,065
• Mississippi: $22,851
• North Carolina: $25,778
• Oklahoma: $23,793
• South Carolina: $26,536
• Tennessee: $23,053
• Texas: $27,836
• Virginia: $33,431
• West Virginia: $21,874

West:

• Alaska: $39,214
• Arizona: $28,743
• California: $34,693
• Colorado: $33,229
• Hawaii: $32,108
• Idaho: $24,676
• Montana: $25,805
• Nevada: $31,499
• New Mexico: $28,716
• Oregon: $28,425
• Utah: $27,830
• Washington: $29,541
• Wyoming: $28,399

Conclusion

Beneficiaries should receive letters in December detailing their specific benefit rate for next year. If you miss this letter, you can still verify your increase via the My Social Security website.

The COLA goes into effect with December benefits, which appear in checks delivered in January 2023. 

Social Security payments are made on Wednesdays, following a rollout schedule based on the beneficiary’s birth date. So if you were born from the 1st through the 10th of the month, your benefits are paid on the second Wednesday of the month.