The 2023 COLA raised SSDI payments by 8.7 percent

In October 2022, the Social Security Administration announced that the 2023 cost-of-living adjustment (COLA) would be 8.7 percent. This was the largest increase since 1981. The raise took effect on January 1, 2023, and applied to all SSDI beneficiaries receiving payments that month.

The 8.7 percent figure was based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) measured from the third quarter of 2021 to the third quarter of 2022. During that period, inflation rose sharply across housing, food, energy, and transportation. The Social Security Administration calculates COLA each year using this same method, so the percentage changes annually based on actual inflation data.

If you were receiving SSDI in January 2023, your benefit amount increased automatically. You did not need to request it or contact Social Security. The new amount appeared in your January payment.

Key Takeaways

  • The 2023 COLA of 8.7 percent was the largest annual increase since 1981, reflecting high inflation in 2021 and 2022.
  • The increase applied automatically to all SSDI beneficiaries on January 1, 2023, with no action required on your part.
  • Social Security calculates COLA each year using the Consumer Price Index, so the percentage varies year to year based on actual inflation.
  • The 2023 increase affected your Medicare premiums, Supplemental Security Income (SSI) payments, and any work incentive calculations you were using.

How the 8.7 percent increase affected your monthly payment

The exact dollar amount of your increase depended on what you were receiving in December 2022. Someone receiving $1,000 per month would have seen an increase of $87. Someone receiving $1,500 would have increased by $130.50. The percentage was the same for everyone, but the dollar amount reflected your individual benefit rate.

The 2023 COLA also raised the substantial gainful activity (SGA) threshold, which is the income limit that determines whether you are working too much to remain on SSDI. For 2023, the SGA threshold was $1,470 per month for non-blind beneficiaries and $3,822 per month for blind beneficiaries. If you were working and monitoring your earnings against this limit, the higher threshold gave you more room to earn before your benefits were affected.

The 2023 COLA and your Medicare costs

While your SSDI payment increased in January 2023, your Medicare Part B premium also increased that month. The Part B premium for 2023 was $164.90 per month for most beneficiaries, up from $170.10 in 2022. However, because of a rule called the "hold harmless" provision, your SSDI payment increase could not be reduced by more than the amount of your Part B premium increase.

This meant that even though Medicare costs rose, your net SSDI payment (the amount you actually received after Medicare was deducted) increased. In practice, most SSDI beneficiaries on Medicare saw their take-home payment rise in January 2023.

If you also paid for Medicare Part D (prescription drug coverage) or Medigap supplemental insurance, those premiums were separate and did not follow the same hold harmless rule. You would have received notices from your insurance carriers about any premium changes for 2023.

How the 2023 COLA affected SSI and work incentives

If you were receiving both SSDI and Supplemental Security Income (SSI), the 2023 COLA raised your SSI payment as well. The federal SSI benefit rate for 2023 was $914 per month for an individual and $1,371 for a couple, both increases from 2022. Some states supplement the federal SSI amount, and those state supplements also increased based on their own formulas.

The 2023 COLA also affected work incentive programs like the Student Earned Income Exclusion and the Plan to Achieve Self-Support (PASS). These programs allow you to set aside income or resources without losing benefits. The income and resource limits tied to COLA increased in 2023, giving you more flexibility if you were using these programs to work toward a goal.

Why 2023 was unusual: the largest COLA in over 40 years

The 8.7 percent COLA in 2023 was historically large because inflation in 2021 and 2022 was unusually high. The Consumer Price Index rose sharply during that period, driven by supply chain disruptions, energy costs, and housing demand. Most years, COLA increases range from 1 to 3 percent. In some years, there is no increase at all.

The 2023 COLA was the result of specific economic conditions during a specific measurement period. It did not mean that inflation would remain at that level or that future COLAs would be as large. In fact, the 2024 COLA was 3.2 percent, reflecting lower inflation in 2023.

Because COLA is tied to actual inflation data, it can vary significantly from year to year. Social Security announces the upcoming year's COLA in October, based on data through September. This gives beneficiaries and the government time to plan for the January payment change.

What to do if your 2023 payment seemed wrong

If your January 2023 SSDI payment did not increase by approximately 8.7 percent, or if the amount seemed incorrect, contact Social Security to ask why. There are situations where the full COLA may not explore: if you were newly approved for SSDI in late 2022, if you had work deductions that reduced your payment, or if you were subject to the Government Pension Offset or Windfall Elimination Provision.

You can reach Social Security by calling 1-800-772-1213, visiting your local Social Security office, or creating an account on ssa.gov to view your payment history. Have your Social Security number and recent payment statements available when you contact them. Social Security can explain exactly how your 2023 payment was calculated.

Frequently Asked Questions

Did the 2023 COLA explore to everyone on SSDI?

Yes, the 8.7 percent increase applied to all SSDI beneficiaries receiving payments in January 2023. The only exceptions are beneficiaries subject to the Government Pension Offset or Windfall Elimination Provision, which reduce benefits based on other government pensions. Even then, the COLA still applies to the reduced amount.

What if I was in a work trial or test period in January 2023?

The COLA still applied to your SSDI benefit amount. If you were in a trial work period or using work incentives, your increased benefit was used to calculate your earnings threshold and any benefit reductions. The higher payment gave you more room to earn before benefits were affected.

Does the 2023 COLA mean my benefits will stay this high forever?

No. Your benefit amount stays at the 2023 level unless a future COLA increases it further. COLA is not may provide every year. If inflation is low or negative, there may be no increase, and your payment would remain the same as the previous year.

How does the 2023 COLA affect my taxes?

The higher SSDI payment may affect how much of your benefits are taxable if you have other income. Up to 85 percent of your SSDI can be subject to federal income tax depending on your combined income (SSDI plus half your SSDI plus other income). The 2023 COLA increased your SSDI amount, which could push you into a higher tax bracket if you have substantial other income.

Will the 2024 COLA be as large as 2023?

No. The 2024 COLA was 3.2 percent, significantly lower than 2023. COLA changes year to year based on actual inflation. The 2023 increase was unusually large because of high inflation in 2021 and 2022. Future increases will depend on inflation during the measurement period for each year.