Social security benefits set for a historic jump from January
The cost of living adjustment is the highest in 40 years but part of it will still be eaten by rising everyday prices.
Millions of Social Security recipients will get an 8.7 percent boost in their benefits in 2023, a historic increase but a gain that will be eaten up in part by the rising cost of everyday living.
The cost-of living adjustment (COLA) — the largest in more than 40 years — means the average recipient will receive more than $140 extra a month beginning in January, the Social Security Administration said Thursday.
While Social Security recipients welcomed the benefit increase, many said it was not enough to cover the impact of inflation.
It’s “not much help”, said 85-year-old Shirley Parker, who lives in Chatham on Chicago’s South Side.
Home maintenance costs and high grocery prices are cutting steeply into her budget. “Food is ridiculous. I come out with a bag full of groceries – $50 – don’t have about 10 items,” she said.
The Social Security COLA was established to help seniors and other recipients manage the higher cost of food, fuel and other goods and services. How well it does depends on what inflation does going forward.
A separate government report Thursday showed inflation newly accelerating. The Consumer Price Index rose 0.4 percent for September after just 0.1 percent in August and is up 8.2 percent for the past 12 months. Jobless claims for unemployment benefits rose for the week.
The stock market opened lower on the inflation news, but recovered by midday.
The Social Security Administration said the estimated average monthly Social Security benefit for all retired workers will be $1,827 starting in January, according to an agency fact sheet.
The boost in Social Security benefits will be coupled with a 3 percent drop in Medicare Part B premiums, meaning retirees will get the full effect of the Social Security increase.
“This year’s substantial Social Security cost-of-living adjustment is the first time in more than a decade that Medicare premiums are not rising and shows that we can provide more support to older Americans who count on the benefits they have earned,” said Social Security Administration’s Acting Commissioner Kilolo Kijakazi.
Colby Nelson, a spokesman for the AARP, said the benefits increase “will provide much-needed relief to millions of Americans”. He called the annual cost-of-living increase “more crucial than ever as high inflation remains a problem for older Americans”.
Several government indexes show that inflation hits older Americans harder than the rest of the population. Medical costs are a big part of the burden.
The Social Security announcement comes just weeks before the midterm elections, and at a time when Democrats and Republicans are sparring about high prices now and how best to shore up the program financially in the future.
President Joe Biden has pledged to protect both Social Security and Medicare. “I’ll make them stronger,” he said last month. “And I’ll lower your cost to be able to keep them.”
William Arnone, chief executive of the National Academy of Social Insurance, an advocacy organisation for Social Security, said the Thursday announcement is “no cause for celebration”, since the benefit will not help all recipients catch up to the impact of inflation, especially if price increases continue in 2023.
“There’s already indications that healthcare inflation is going to be through the roof next year,” Arnone said.
‘Still struggling to survive’
Margaret Toman, a 78-year-old in Garner, North Carolina, who had stopped working to take care of her mother who has since died, described the 8.7 percent increase as “quite stingy.”
“I think most of us who are older receiving Social Security are grateful for that Social Security,” she said. “But that gratitude sometimes covers up or replaces a certain feeling of anger at having paid into a system for so long and still struggling to survive.”
About 70 million people – including retirees, disabled people and children – receive Social Security benefits. This will be the biggest increase in benefits that baby boomers, those born between the years 1946 and 1964, have ever seen. The last time a COLA was higher was in 1981, at 11.2 percent.
Willie Clark, 65, of Waukegan, Illinois, said his budget is “real tight” and the increase in his Social Security disability benefits could give him some breathing room to cover the cost of the household expenses he has been holding off on.
Still, he doubted how much of the extra money will end up in his pocket. His rent in an apartment building subsidised by the US Department of Housing and Urban Development is based on his income, so he expected that will rise, too.
Social Security is financed by payroll taxes collected from workers and their employers. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $160,200.
The financing setup dates to the 1930s, the brainchild of President Franklin D Roosevelt, who believed a payroll tax would foster among average Americans a sense of ownership that would protect the program from political interference.
Next year’s higher payout, without an accompanying increase in Social Security contributions, could put additional pressure on a system that is facing a severe shortfall in coming years.
The annual Social Security and Medicare trustees report released in June said the programme’s trust fund will be unable to pay full benefits beginning in 2035
If the trust fund is depleted, the government will be able to pay only 80 percent of scheduled benefits, the report said. Medicare will be able to pay 90 percent of total scheduled benefits if the fund is depleted.
In January, a Pew Research Center poll showed 57 percent of US adults saying that “taking steps to make the Social Security system financially sound” was a top priority for the president and Congress to address this year. Securing Social Security got bipartisan support, with 56 percent of Democrats and 58 percent of Republicans calling it a top priority.