Recent estimates suggest that the quick rise in inflation may give Social Security recipients a 10.5 percent pay bump the following year.
The Senior Citizens League, an advocacy organization, predicted that as a result, the average monthly retiree payout, which is currently $1,668, will rise by roughly $175. However, it might not be enough to cover seniors’ expenses if price rises aren’t curbed in the following months.
The COLA, or cost of living adjustment, is calculated annually by the Social Security Administration using inflation data from June as a basis. It rose by 9.8% over the preceding 12 months, compared to the bigger, more well-known Consumer Price Index for All Urban Consumers.
How much more retirees, those with disabilities, and other recipients would actually receive won’t be known until the fall. The CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers, which the government issues in October, was used to calculate average inflation for the third quarter, which served as the basis for the official adjustment.
According to the league
If inflation increases over the following three months, the 2023 adjustment may be 11.4 percent. If price increases are minimal, the benefits increase might be 9.8%. The league anticipated that the adjustment would increase by 8.6 percent based on inflation at the time in May.
A contrasting estimate from the watchdog organization Committee for a Responsible Federal Budget states that if the current inflation track holds, the adjustment would be 11.4 percent. If the rate of inflation remains at its June level, the raise would be 9 percent. Whatever it is, it will probably be the biggest change since the seniors’ last double-digit boost in the early 1980s.
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Benefits exceed expenses
Social Security claimants got a 5.9 percent adjustment for 2022. Mary Johnson, a policy analyst for the League of United Latin American Citizens, disputes that.
Consumers “have experienced a gap in their benefits” because the 5.9 percent COLA was “that high and so much higher than the inflation rate that they received,” Johnson continued. People are depending on credit cards more frequently as a result of a lack of accessible cash or retirement savings.
Half of older citizens had to utilize their emergency savings in the previous year, according to a survey the league conducted between January and March. In the survey from the previous year, that number was 36%.
Since the survey in 2021, more than twice as many respondents reported using a food pantry or applying for food assistance. Among the requests for assistance were those for rent, power, and prescription medication expenditures.
A second analysis from the league found that inflation had reduced Social Security benefits’ buying power by 40% since 2000. The biggest drop since the survey’s inception, the entitlement’s purchasing power fell by 10% between March 2021 and March of this year. This year, inflation has increased more, worsening the loss, Johnson stated.
Rates for Medicare could perhaps be lowered
On the other hand, Medicare premiums for the elderly should be reduced. For those with the lowest income bracket, the monthly payments increased from $148.50 to $170.10 in 2022 due to a 14.5% increase in Part B premiums. An enormous rise in healthcare expenses is anticipated as a result of the new Alzheimer’s drug Aduhelm.
Medicare and Medicaid Services continue to refuse coverage for the prescription, despite the fact that the manufacturer of Aduhelm has recently cut the cost and limited coverage. The lower-than-expected spending will result in a change to the 2023 premium.
The final decision on premiums for 2023 is anticipated to be announced in the fall. There could be repercussions that are not immediately apparent.
A significant increase in the retirement age could have a negative impact on seniors with low incomes. That’s because it can cause them to exceed the income thresholds required to be eligible for government assistance, like food stamps, or force them to begin paying taxes on the benefits.
According to research by the league, 15% of seniors who receive assistance said they lost access to at least one program because of the significant rise for 2022, while 39% of seniors who receive assistance claimed their benefits were reduced. If a significant adjustment is made, the trust fund for Social Security might likewise exhaust more quickly
According to Charles Blahous
A former public trustee for Social Security and Medicare and a senior research strategist at George Mason University’s Mercatus Center, the Social Security and Medicare Trustees based their annual report on the expectation that inflation would increase to 4.5 percent in 2022 and 2.3 percent in 2023.
The Social Security trust fund is also expected to gain from higher payroll tax receipts from wage rises and higher income tax receipts from recipients receiving larger benefits.
According to the most recent trustees report, Social Security would run out of money by 2035 if Congress does nothing.
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