What the 2023 COLA meant for SSDI recipients

In October 2022, the Social Security Administration announced a 8.7% cost-of-living adjustment (COLA) for 2023 — the largest increase in four decades. For SSDI recipients, this meant their monthly benefit amount rose by 8.7% starting in January 2023. If you received $1,200 per month in 2022, your 2023 payment became $1,304.40.

The 8.7% figure applied uniformly to all SSDI beneficiaries, regardless of age, work history, or current benefit level. The increase was automatic — you did not need to request it or contact Social Security. The new amount appeared in your January 2023 payment.

This was not a one-time bump. Once your benefit increased for 2023, that higher amount became your new baseline. Future COLAs would be calculated from that new figure, not from your 2022 amount.

Key Takeaways

  • The 2023 COLA raised SSDI payments by 8.7% across the board, with increases taking effect in January 2023 payments.
  • The increase applied automatically to all beneficiaries; no action was required on your part.
  • Your new 2023 benefit amount became the baseline for all future COLA calculations and ongoing payments.
  • The 2023 increase affected your Medicare premiums, Medicaid may be able to access in some states, and work incentive thresholds like the Substantial Gainful Activity (SGA) limit.
  • SSDI recipients who also received Supplemental Security Income (SSI) saw increases to both programs, though SSI has a separate federal benefit rate.

How the 2023 COLA was calculated

The COLA is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of inflation published monthly by the Bureau of Labor Statistics. Social Security calculates the COLA by comparing the average CPI-W for July, August, and September of the current year to the same three-month average from the prior year.

For 2023, inflation was significantly higher than in 2022, which is why the COLA reached 8.7%. This was the highest annual increase since 1981. The specific calculation: the average CPI-W for July–September 2022 was compared to July–September 2021, and the percentage difference became the 2023 COLA.

Social Security announces the COLA in mid-October each year, and it takes effect on January 1 of the following year. The announcement is made by the Commissioner of Social Security and published on the official Social Security website.

Effects on your Medicare premiums and Medicaid coverage

When your SSDI benefit increased in 2023, your Medicare Part B premium may have changed. Most SSDI recipients are automatically enrolled in Medicare Part B after receiving SSDI for 24 months. The Part B premium is deducted directly from your SSDI payment.

In 2023, the standard Medicare Part B premium was $164.90 per month, up from $170.10 in 2022 (the premium actually decreased that year due to a legal provision called the "hold harmless" rule, which protects beneficiaries from premium increases larger than their COLA). Your actual premium depends on your income and tax filing status; higher earners pay more through Income-Related Monthly Adjustment Amounts (IRMAA).

For Medicaid, the impact varies by state. Some states use SSDI benefit amounts to determine Medicaid income limits. If your state uses a "tied" system, your 8.7% increase in SSDI may have affected whether you remained under the income threshold for Medicaid coverage. A few states have "maintenance of effort" rules that protect Medicaid coverage even when SSDI rises, but most do not. Contact your state Medicaid office to confirm whether the 2023 COLA affected your coverage.

Impact on work incentives and the SGA limit

The Substantial Gainful Activity (SGA) limit — the earnings threshold above which Social Security assumes you are working and may suspend your SSDI — also increased with the 2023 COLA. For 2023, the SGA limit was $1,470 per month for non-blind beneficiaries and $3,822 per month for blind beneficiaries.

This means you could earn up to $1,470 per month (or $3,822 if blind) without Social Security automatically concluding you were performing substantial work. Earnings above that level trigger a work incentive review, though you may still receive benefits under other work incentive programs like Impairment Related Work Expenses (IRWE) or Plans to Achieve Self-Support (PASS).

The Trial Work Period (TWP) — a nine-month window during which you can test your ability to work without losing benefits — was unaffected by the COLA. The TWP remains a fixed nine-month period, and the earnings threshold for counting a month toward the TWP in 2023 was $1,050.

SSDI and SSI recipients: different COLA treatment

If you received both SSDI and SSI, you saw increases to both payments, but they were calculated differently. SSDI increased by 8.7% because it is tied to the CPI-W. SSI, by contrast, is tied to the Federal Benefit Rate (FBR), which also increased by 8.7% in 2023, but SSI has additional rules about unearned income and resource limits.

The 2023 SSI Federal Benefit Rate was $914 per month for an individual and $1,371 for a couple. If you lived in a state that supplements the federal SSI payment, your state supplement also increased, though the percentage varied by state. Some states tied their supplements to the federal COLA; others did not.

If you were subject to the SSI resource limit (currently $2,000 for an individual, $3,000 for a couple), the 2023 COLA did not change those limits. Resource limits are adjusted only when Congress passes legislation to do so, which has not happened since 1989.

Taxes and the 2023 COLA

The 2023 COLA also affected the taxation of SSDI benefits. Social Security benefits become taxable if your combined income exceeds certain thresholds: $25,000 for a single filer or $32,000 for married filing jointly. Combined income includes your SSDI, other income, and half of your Social Security benefits.

Because your SSDI payment increased by 8.7%, your combined income likely increased as well, which may have pushed you over the taxation threshold if you were close to it in 2022. If you pay federal income taxes, you may want to adjust your withholding or estimated tax payments to account for the higher SSDI amount. The IRS publishes a worksheet each year to help beneficiaries calculate taxable benefits.

You do not pay Social Security payroll taxes (FICA) on SSDI benefits themselves, but if you work and earn income, you pay payroll taxes on those earnings as usual.

Planning ahead: what to expect from future COLAs

The 2023 COLA of 8.7% was historically large. Future COLAs will depend on inflation in the coming years. If inflation remains moderate, future COLAs will be smaller. If inflation rises again, COLAs could be larger.

Social Security publishes COLA estimates in the fall, but these are projections based on data available at that time. The final COLA is not announced until mid-October. If you budget based on an estimated COLA and the actual COLA differs, your January payment may be higher or lower than you expected.

One practical step: review your Medicare Part B premium, Medicaid status, and work incentive thresholds each January after a COLA takes effect. These are the areas most likely to change, and catching changes early can prevent overpayments or loss of benefits.

Frequently Asked Questions

Did I have to do anything to get the 2023 COLA increase?

No. The COLA is automatic. Social Security applied the 8.7% increase to all SSDI beneficiaries' accounts in December 2022, and the new amount appeared in your January 2023 payment. You did not need to contact Social Security, file a form, or take any action.

What if I missed my January 2023 payment or it looked wrong?

Contact Social Security directly at 1-800-772-1213 or visit your local Social Security office. Bring your Social Security card and a photo ID. If your payment was delayed or incorrect, Social Security can investigate and correct it. Keep records of your 2022 benefit amount so you can verify the 8.7% increase was applied correctly.

Does the 2023 COLA affect my work incentive programs like PASS or IRWE?

PASS and IRWE thresholds are not directly tied to the COLA, but they may be affected indirectly. For example, if your SSDI benefit increased and you are using PASS to set aside income for a work goal, the higher SSDI amount may change your countable income under the PASS plan. Review your PASS or IRWE plan with your work incentive counselor to confirm it still aligns with your current benefit amount.

If I was on the fence about working in 2023, did the COLA change whether I should try?

The higher SSDI payment means you have more financial cushion, which can make work less urgent. However, the SGA limit also increased to $1,470, so you have more room to earn before Social Security reviews your work status. The decision to work depends on your health, goals, and access to work incentives — not just the benefit amount. A work incentive counselor can help you weigh the options.