The 2023 SSDI benefit increase was 8.7 percent

Social Security announced in October 2022 that benefits for all recipients—including those on SSDI—would rise by 8.7 percent starting in January 2023. This was the largest cost-of-living adjustment (COLA) in four decades, driven by inflation that had climbed throughout 2022. The increase meant that someone receiving $1,000 per month in December 2022 would receive $1,087 in January 2023.

The 8.7 percent figure applied uniformly to all SSDI beneficiaries, regardless of age or the reason for their disability. It also applied to Supplemental Security Income (SSI) recipients and to people receiving Social Security retirement benefits. The adjustment was automatic—no one had to request it or submit paperwork. The new payment amount appeared in bank accounts or on benefit checks starting with the January payment cycle.

This increase was substantially larger than the typical COLA, which has averaged around 2 to 3 percent in most years since 2010. The 2023 adjustment reflected the unusual inflation environment of 2021 and 2022, when consumer prices rose faster than they had in decades.

Key Takeaways

  • The 2023 COLA raised SSDI payments by 8.7 percent across the board, with no process or request required.
  • A person receiving $1,000 monthly saw their benefit increase to $1,087, though the exact dollar increase depended on their individual benefit amount.
  • The increase took effect in January 2023 and appeared automatically in the next payment after December 31, 2022.
  • This was the largest COLA since 1983, driven by inflation measured through the third quarter of 2022.

How the 8.7 percent was calculated

Social Security calculates the annual COLA by measuring inflation using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Specifically, the agency compares the average CPI-W for the third quarter of the current year (July, August, September) to the average for the third quarter of the previous year. The percentage change between those two periods becomes the COLA for the following year.

For 2023, the third quarter of 2022 showed inflation that was 8.7 percent higher than the third quarter of 2021. This comparison captured the surge in prices for gasoline, food, housing, and other goods and services that occurred during that period. Because inflation was high, the COLA was high. If inflation had been lower, the COLA would have been lower—or, in years with deflation, there would have been no increase at all (though benefits never decrease).

The formula is set by federal law and does not change year to year. Social Security does not decide whether the increase is "fair" or "enough"—the agency straightforward applies the formula to the CPI-W data and announces the result in mid-October, effective the following January.

What the increase meant for different benefit amounts

The 8.7 percent increase applied to each person's individual benefit amount, so the dollar increase varied. Someone receiving $800 per month saw an increase of about $70. Someone receiving $1,500 per month saw an increase of about $130. Someone receiving $3,000 per month saw an increase of about $260.

The increase also applied to family members receiving benefits on a disabled worker's record. If a disabled worker's child or spouse was receiving a benefit based on that worker's earnings, the child's or spouse's benefit also rose by 8.7 percent in January 2023.

For people on SSI, the increase worked differently because SSI has a federal benefit rate (the maximum amount the federal government pays). In 2023, the federal SSI benefit rate rose from $841 per month to $914 per month for an individual, and from $1,261 to $1,371 for a couple. However, many states supplement the federal SSI rate with their own money, and state supplement amounts vary. A person receiving SSI in a state with a supplement needed to check with their state agency to learn their new total benefit amount.

Why 2023 was unusual compared to other years

The 8.7 percent COLA in 2023 was exceptional. In 2022, the COLA had been 5.9 percent. In 2021, it was 1.3 percent. In 2020, it was 1.3 percent. In 2019, it was 2.8 percent. The 2023 increase was the largest since 1983, when the COLA was 11.2 percent during a different period of high inflation.

The size of the 2023 increase reflected the specific economic conditions of 2021 and 2022. Pandemic-related supply chain disruptions, increased consumer spending, and monetary policy all contributed to inflation that was higher than the typical range. By late 2022 and into 2023, inflation began to moderate, but the COLA is always based on data from the prior year, so the 2023 increase captured the peak inflation period.

For beneficiaries, the 8.7 percent increase meant that their purchasing power—the amount of goods and services they could buy—was partially restored after inflation had eroded it. However, whether the increase fully offset the inflation that beneficiaries experienced depended on their individual spending patterns, since the CPI-W measures average prices across the urban wage-earning population, not every person's actual expenses.

How the increase affected work incentives and earnings limits

SSDI has an earnings limit called the Substantial Gainful Activity (SGA) level. In 2022, the SGA limit was $1,350 per month. In 2023, it rose to $1,470 per month. This limit is the amount of monthly earnings above which Social Security assumes you are working at a substantial level and may no longer be disabled. The SGA limit increases each year based on changes in national average wages, not the COLA, so it rose independently of the 8.7 percent benefit increase.

The increase in the SGA limit meant that someone could earn more in 2023 before triggering a work-related review of their disability status. However, SSDI also has a Trial Work Period (TWP) and Extended may be able to access Period (EEP) that allow beneficiaries to test their ability to work without when ready losing benefits. These periods are based on months worked, not dollar amounts, so the COLA did not directly affect them.

Impact on Medicare and Medicaid coverage

Most SSDI beneficiaries are also enrolled in Medicare. The 8.7 percent increase in SSDI benefits did not automatically increase Medicare premiums by the same amount, but Medicare Part B premiums (which cover doctor visits and outpatient care) did increase for 2023. The Part B premium rose from $170.10 per month in 2022 to $164.90 per month in 2023—actually a decrease, because fewer people than expected enrolled in higher-income brackets. For beneficiaries with higher incomes, premiums were higher.

For people on both SSDI and Medicaid, the benefit increase did not affect Medicaid coverage in most states. Medicaid may be able to access is tied to income limits that vary by state, and a COLA increase does not automatically change those limits. However, some states use the federal SSI benefit rate as a reference point for their Medicaid income limits, so those limits may have shifted. A person on both SSDI and Medicaid should have checked with their state Medicaid agency if they had questions about whether the benefit increase affected their coverage.

Frequently Asked Questions

Did I have to do anything to receive the 8.7 percent increase?

No. The COLA increase was automatic. Social Security applied it to all SSDI beneficiaries' accounts and paid the new amount starting in January 2023. You did not need to contact Social Security, submit a form, or take any action to receive it.

What if I was on SSDI but also working—did the increase affect my earnings limit?

The 8.7 percent COLA did not change the Substantial Gainful Activity (SGA) earnings limit. However, the SGA limit does increase each year based on wage growth. In 2023, the SGA limit rose to $1,470 per month, which was higher than 2022. You can earn up to that amount without Social Security assuming you are working at a substantial level.

I receive SSI, not SSDI. Did I get the same 8.7 percent increase?

The federal SSI benefit rate increased by 8.7 percent, from $841 to $914 per month for an individual. However, if you live in a state that supplements the federal SSI rate, your total benefit depends on both the federal increase and your state's supplement. Contact your state SSI agency to confirm your new total amount.

Does the COLA increase mean my taxes will go up?

SSDI benefits are not taxable income for most beneficiaries. If you have other income and your total income exceeds certain thresholds, a portion of your SSDI benefits may be subject to federal income tax. The 8.7 percent increase in your benefit amount could push you over those thresholds if you were close to them. Consult a tax professional if you are unsure whether your benefits are taxable.

Will the 2024 COLA be as large as 2023?

No. Social Security announced in October 2023 that the 2024 COLA would be 3.2 percent, substantially smaller than 2023. The COLA is based on inflation from the prior year, and inflation moderated significantly in 2023 compared to 2022. Future COLAs will depend on inflation rates in the years ahead.