The 2023 SSDI COLA was 8.7 percent

Social Security announced in October 2022 that the 2023 cost of living adjustment (COLA) would be 8.7 percent. This was the largest increase in four decades. If you received SSDI in December 2022, your January 2023 payment was 8.7 percent higher than your December 2022 payment.

The COLA is calculated by comparing the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of one year to the third quarter of the previous year. In 2022, inflation pushed the CPI-W up sharply, which triggered the large adjustment. The actual dollar amount of your increase depended on what you were receiving before the adjustment.

This adjustment applied to all SSDI beneficiaries automatically. You did not need to do anything to receive it. The increase showed up in your January 2023 payment if you were on the rolls in December 2022.

Key Takeaways

  • The 2023 COLA of 8.7 percent was the largest annual increase since 1982, driven by inflation measured through the third quarter of 2022.
  • The adjustment applied automatically to all SSDI beneficiaries in January 2023 with no action required on your part.
  • Your actual dollar increase depended on your benefit amount before the adjustment, so two people did not necessarily receive the same dollar amount.
  • COLA adjustments are recalculated every year based on inflation data, so the 2024 COLA and beyond will be different amounts.

How the COLA is calculated each year

Social Security uses a specific inflation measure called the CPI-W to set the COLA. This index tracks price changes for food, housing, transportation, medical care, and other goods and services that wage earners buy. The agency compares the average CPI-W for July, August, and September of one year to the same three months in the previous year. If there is no increase, the COLA is zero — benefits do not go down.

The announcement always comes in October, and the new payment amount takes effect the following January. This timing is fixed by law. You will know the next year's COLA by mid-October of the current year.

The CPI-W is not the same as the overall Consumer Price Index (CPI-U) that you may hear about in news reports. The CPI-W focuses on wage earners and clerical workers, while the CPI-U includes all urban consumers. Social Security is required by law to use the CPI-W, even though some argue it does not reflect the spending patterns of older adults and people with disabilities as accurately.

Why 2023 saw such a large increase

The 8.7 percent COLA in 2023 reflected rapid inflation in 2021 and 2022. Prices rose for gasoline, groceries, housing, and utilities. Supply chain disruptions, increased demand for goods, and other economic factors pushed the CPI-W higher during the measurement period (July through September 2022).

Large COLA adjustments are uncommon. Before 2023, the largest COLA since 1982 had been 5.8 percent in 2008. Most years see adjustments between 1 and 3 percent. The 8.7 percent increase was notable because it happened after years of very small adjustments — 2016 and 2017 had zero COLA, and 2018 through 2021 ranged from 1.3 to 5.9 percent.

What your 2023 payment increase actually meant

An 8.7 percent increase sounds large, but the actual dollars depended on your benefit amount. If you were receiving $1,000 per month in December 2022, your January 2023 payment was $1,087. If you were receiving $800 per month, your increase was about $70. The percentage was the same for everyone, but the dollar amount varied.

The increase also affected your family if you received benefits as a spouse or child of a worker. Family members' benefits are calculated as a percentage of the worker's primary insurance amount, so when the worker's benefit went up 8.7 percent, the family members' benefits went up by the same percentage.

If you were receiving Supplemental Security Income (SSI) in addition to SSDI, the SSI payment also increased by 8.7 percent in January 2023. However, SSI has a resource limit and an income limit, so the increase could have affected your SSI amount if you were close to those limits. This was rare but worth checking if your SSI changed unexpectedly.

How COLA affects your Medicare premiums

Most SSDI beneficiaries pay for Medicare Part B (medical insurance) through a deduction from their SSDI check. In some years, the increase in your SSDI payment is partly or entirely offset by an increase in your Medicare Part B premium. This is called the "hold harmless" provision.

In 2023, Medicare Part B premiums did increase, but the hold harmless rule protected most beneficiaries. If you were already on Medicare before 2023, your SSDI payment could not decrease because of the premium increase. However, if you newly enrolled in Medicare in 2023, you may have paid a higher premium than someone already enrolled.

The relationship between COLA and Medicare premiums is complex and changes year to year. If you noticed your net payment (after Medicare deductions) did not increase by the full 8.7 percent, the Medicare premium increase was the reason.

COLA adjustments for 2024 and beyond

The 2024 COLA was 3.2 percent, announced in October 2023. This was lower than 2023 because inflation slowed during the measurement period (July through September 2023). Future COLA amounts will continue to depend on inflation data measured in the third quarter of each year.

You cannot predict future COLA amounts with certainty, but you can watch inflation reports from the Bureau of Labor Statistics starting in summer to get a sense of what the announcement might be. Social Security publishes the official COLA in October each year, and it takes effect the following January.

If you are planning your budget or making decisions about work, remember that COLA adjustments vary year to year. Some years will be large, some will be small, and in rare cases (like 2016 and 2017) there may be no adjustment at all.

Frequently Asked Questions

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

No. The increase was automatic. If you were receiving SSDI in December 2022, the higher amount appeared in your January 2023 payment with no action on your part. You did not need to contact Social Security or file any form.

What if I started receiving SSDI after December 2022?

Your first payment was calculated using the new 2023 benefit amount. You did not receive a separate increase because you were not on the rolls when the COLA took effect. Your benefit amount included the COLA from the start.

Does COLA explore to SSI as well as SSDI?

Yes. SSI recipients received the same 8.7 percent increase in January 2023. However, SSI has income and resource limits, so a large increase could have affected your SSI amount if you were close to those limits. Check your SSI notice if your payment changed by less than 8.7 percent.

Why did my net payment increase by less than 8.7 percent?

Medicare Part B premiums increased in 2023, and those premiums are deducted from your SSDI payment. The hold harmless rule prevented your payment from decreasing, but it did not prevent the premium from taking some of your COLA increase. This is why your net payment may have risen less than 8.7 percent.

Will the COLA be 8.7 percent again in 2024?

No. The 2024 COLA was 3.2 percent because inflation slowed. COLA is recalculated every year based on current inflation data, so the amount changes annually. There is no way to know the 2025 COLA until October 2024.