Mark your calendar – the annual, Social Security Cost-Of-Living Adjustment (COLA) for 2023 will be announced on October 13, 2022. Considering the country has been dealing with record high inflation, the 2023 COLA has been highly anticipated by retirees and those planning to retire soon.
Based on a formula using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the latest estimate from the Senior Citizens League puts it at as much as 8.7% for 2023. Keep in mind this is an estimate based on the most current inflation numbers for August 2022. If data for September reveals a reduction of inflation, it could result in a slightly lower COLA for 2023.
Is The CPI-W Accurate Indicator Of Expenses For Seniors?
Over the years, a number of experts have pointed out that the CPI-W may not accurately indicate the rising cost of living expenses for retirees receiving Social Security. The CPI-W is based on expenses paid by those who are still working and likely in better health than retirees. Research shows seniors age 65 and older spend approximately twice as much on healthcare related expenses than younger people. In fact, some groups have proposed the use of a Consumer Price Index specifically for seniors.
“The wage base limit, which is also known as the taxable maximum, is the threshold for earnings that are subject to the OASI tax each year.”
Wage Base Limit Will Increase In 2023
As you know, FERS and CSRS Offset workers are eligible for Social Security because they pay into system through the OASI tax deducted from their paychecks. The wage base limit, which is also known as the taxable maximum, is the threshold for earnings that are subject to the OASI tax each year. Like COLAs, the wage limit is adjusted based on changes in the CPI-W.
According to the “2022 Annual Report of the Board of Trustees of the Federal Old-Age and Survivors Insurance and Federal Disability Insurance Trust Funds” released back in June, the wage base for 2023 will be $155,100. This is an increase from $147,000 in 2022.
Other Social Security Headlines In The News
The Social Security Trust Funds are expected to run out of reserves as soon as 2035. If this comes to pass, retirees will only receive 78% to 80% of their full benefit. The fear of Social Security running out of money has prompted some workers to change their Social Security strategy and file for benefits earlier than they had previously planned. Before you make any major changes, consider working with an FRC™ trained advisor who understands your federal benefits and can help you weigh the pros and cons.
