Social Security’s cost-of-living adjustment could be in double digits thanks to inflation

Social Security's cost-of-living adjustment could be in double digits thanks to inflation
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That would add about $175 to the average monthly pension, which currently stands at $1,668, according to The Senior Citizens League, an advocacy group that released the projection Wednesday. But it still may not be enough to cover expenses of the elderly if price increases are not tamed in the coming months.

The estimate is based on the June reading for an inflation measure, which the Social Security Administration uses to calculate the annual cost of living adjustment, or COLA. It’s up 9.8% over the last 12 months, compared to 9.1% year-on-year increase for the broader and better known Consumer Price Index for All Urban Consumers.

How much retirees, disabled Americans, and other buyers will actually receive will not be determined until the fall. The official adjustment, released by the agency in October, is based on average inflation in the third quarter as measured by the Consumer Price Index for Urban Wage-Ware and Office Workers, known as the CPI-W.

The league said the 2023 adjustment could be 11.4% if inflation rises in the next three months. If price increases are moderate, the benefit increase could be 9.8%.

In May, the league had forecast the correction would rise 8.6% based on inflation at that point.

AND separate estimate An observer group, the Committee on the Responsible Federal Budget, found that the adjustment would be 11.4% if the current inflation trend continued. If inflation stays at the June level, the increase will be 9%.

Whatever it was, the adjustment will likely be the largest since the early 1980s, when seniors received a double-digit increase for the last time.

Bills that exceed benefits

Social Security recipients 5.9% adjustment But league policy analyst Mary Johnson said inflation has outstripped that and many seniors are struggling to pay their bills.

“Inflation is so high, and much higher than the 5.9% COLA that people take, they’ve had a shortfall in benefits,” Johnson said. “If people don’t have enough retirement savings or cash to come easily, people are putting more money into consumer credit cards,” he said.

Half of seniors said they had to spend their emergency savings in the past year, according to a survey the league conducted between January and March. That compares to 36% in a survey last year.

Almost half said they had visited. food pantry or applied for food stamps, more than double the share in the 2021 survey. And more have applied for help with medical and prescription drug costs, as well as bills and rent.

According to a separate study from the league, Social Security benefits have lost 40% of their purchasing power since 2000 due to high inflation. The purchasing power of the right fell 10 percentage points between March 2021 and last March, the biggest drop since the study began in 2010. Johnson said the loss is even greater now as inflation continues to rise this year.

Lower Medicare premiums possible

But seniors should take a break when it comes to Medicare premiums. They had to struggle with one 14.5% increase in 2022 Part B premiumsincreased monthly payments for those in the lowest income brackets to $170.10 from $148.50 last year. AND main driver of increase It was a predicted jump in spending due to Aduhelm, a new and expensive drug for Alzheimer’s disease.
However, since then, Aduhelm’s manufacturer has lowered the price, and Centers for Medicare and Medicaid Services limited coverage The agency said the drug will include lower-than-anticipated expenses in its 2023 premium.

He expects the 2023 premium to be lower than this year’s premium, although the final determination will be made in the fall.

other reflections

While many older Americans can use the extra money, a big adjustment could actually hurt low-income seniors. This is because qualifying for government benefits like food stamps can push them above their income line or require them to start paying taxes on benefits.

According to a survey by the League, about 39% of seniors receiving benefits said their benefits were reduced due to heavy adjustments for 2022, while 15% said they lost access to at least one program.

Also, some experts are concerned that a major adjustment could deplete Social Security’s trust funds faster.

In their annual reports, the program’s board of trustees have assumed inflation to be 4.5% in 2022 and 2.3% in 2023 – though the actual numbers will likely be much higher than that, Charles Mason University’s senior research strategist and former public trustee at the Mercatus Center. Blahous said at a recent Committee on Social Security and Medicare, the forum for Responsible Federal Budget.

However, the Social Security trust fund is also expected to benefit from higher payroll tax revenue because of this. wage increases and from greater income tax revenue from greater benefits paid to recipients.
Social Security will not be able to pay all benefits until 2035 Unless Congress takes action, according to the latest trustee report.

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