Social Security COLA Benefits Will Increase In 2023

Social Security COLA Benefits Will Increase In 2023

Experts agree that the substantial rise in Social Security benefits scheduled for 2023 will be greatly appreciated by the estimated 70 million Americans who currently receive the programme. Many seniors receiving Social Security benefits have seen their payments rise nearly annually for the past four decades. These cost of living increases, or COLAs, have been very modest because inflation has been low over the past decade or so. However, the growth was substantial last year, and it is even larger this year.

On Thursday, the Social Security Administration announced that beneficiaries would see an increase in their monthly benefits of 8.7 per cent to aid with the rising cost of food, housing, healthcare, and other necessities. The consumer price index for September, also reported by the Bureau of Labor Statistics on Thursday, showed an annual increase in prices of 8.2 per cent, suggesting that the Federal Reserve’s efforts to pierce the excessive inflation rate have not yet succeeded.

Since 1981, when inflation was considerably higher than it is today, no COLA has been larger than the one scheduled for 2023. The new cost-of-living adjustment (COLA) and its effects on Social Security recipients, as well as any outstanding issues that may arise, are examined.

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What factors into the cost of living adjustment?

However, according to William Arnone, CEO of the National Academy of Social Insurance, this hasn’t always been the case, and there was a time when the cost-of-living adjustment was based on more than just math.

The SSA reports that although Social Security was founded in the 1930s, benefits were not raised by Congress until 1950. Subsequent increases occurred every few years over the next two decades. A rule mandating an annual raise pegged to inflation was passed into law by President Richard Nixon in 1972.

Since then, the Bureau of Labor Statistics has been looking at the year-over-year change in the worker’s average consumer price index in the months of July, August, and September. A yearly rise in Social Security payments is calculated by taking the per cent change and using the Social Security Administration’s formula. If the percentage change is a drop, there will be no cost-of-living adjustment (COLA) made.

With inflation beginning to rise by late 2020, it was only natural that 2021’s payouts would increase by 5.9 per cent. Due to 2022’s price increases, a sizable cost-of-living adjustment was predicted and confirmed only last Thursday.

In what ways would the increase in Social Security benefits assist people?

Experts warn of potentially catastrophic consequences. The Social Security Administration estimates that the average monthly benefit for a retired person will be $1,827, an increase of $144. More than 70 million Americans get either Social Security or SSI income, and they will begin receiving the boost in their payouts in either December or January.

In 2021, women made up 55% of all Social Security beneficiaries, as reported by the SSA. Despite the fact that retirees make up the great majority of persons receiving Social Security benefits, an estimated three million youngsters also do. Those who are disabled or have lost a spouse also qualify for benefits.

The Social Security Administration predicts that the average payout for a widow with two children will rise from $3,238 to $3,520 and that the average benefit for disabled employees will rise from $1,364 to $1,483. The Senior Citizens League’s Social Security and Medicare policy analyst, Mary Johnson, has noted that another significant shift will be the reduction in Medicare Part B rates.

There has never been a moment when we have seen that combo, and this may be the only time ever, according to Johnson. That’s why I’m urging everyone to enjoy it. Johnson claims that unlike in previous years, Medicare premiums will not consume a sizable chunk of the COLA this year.

She argued that those on lower incomes will continue to have difficulties as a result of rising prices, even after accounting for the cost of living increase. She said that the dramatic increase in payments would benefit people, especially as the cost of heating rises with the arrival of winter.

If you need help paying for your heating bills but are on a low income, I urge you to get in touch with your local family services department and Medicaid offices to learn more about and apply for any available programmes. “Now is the moment,” she proclaimed.

Reasons why the change won’t completely alleviate rising costs for the elderly

Whether or not greater Social Security payments will contribute to rising inflation is currently unclear. But Arnone said his company has a “strong intuition that it will assist reduce a recession” because elderly people are more likely to spend money than save it.

Throughout 2018, Johnson has reported that inflation has consistently outpaced the 5.9 per cent CPI increase scheduled for the year’s end. So, the cost-of-living increase from last year is not enough to combat the current economic climate.

Arnone argued that the universal nature of Social Security benefits masks the fact that people’s actual needs vary across demographic factors such as location, race, and age. Inflation has a disproportionately negative effect on the elderly.

Health care is the top example of an area where they frequently incur large out-of-pocket costs, according to Arnone. The Associated Press reports that the cost of vision care rose by 3.2 per cent between August and September, the highest such increase on record. Arnone pointed out that the COLA is computed using the worker’s consumer price index, which may not accurately reflect the spending habits of retirees.

He mentioned the Elder Index, a study conducted by the Gerontology Institute at UMass Boston, as a more precise indicator of the extent to which seniors face economic hardship due to the high cost of housing, transportation, healthcare, and food. Despite the index’s “growing traction,” he stressed that “it’s all hypothetical at this time.”