The Social Security Administration announced an 8.7% annual cost-of-living adjustment amid a high rate of inflation who was penalizing fixed-income Americans.
The amendment represents the largest one-time increase since 1981, and the largest increase seen by survivors today. The increase that took effect this year was 5.9%.
The increase will begin with benefits payable to more than 65 million Social Security beneficiaries in January 2023. The agency said the increase in payments to more than 7 million SSI beneficiaries will begin on December 30, 2022.
Thanks to its unusual prevarication, Social Security recipients can expect the full cost of a living adjustment to increase. In previous years, the annual adjustment was devoured by increases in the cost of Part B of Medicare, the Medicare unit that pays for physician and hospital outpatient services.
But Medicare premiums are set to remain flat or even fall by 2023 due to a significant increase in the past year linked to a new calculation in the cost of Alzheimer’s treatment.
“Medical care premiums will fall and Social Security benefits will rise in 2023, giving seniors more peace of mind and their breathing,” said Kilolo Kigakazi, acting commissioner of the Social Security Administration, in a statement.
“This year’s major Social Security cost-of-living adjustment is the first time in more than a decade that Medicare premiums have not gone up and shows that we can provide more support to older Americans who are dependent on their benefits.”
The annual adjustment is calculated by averaging inflation readings among urban wage earners and clerical workers from July, August, and September. Annual inflation readings came in around those months 8.5%And the 8.3%And the 8.2%.
Despite the expected increase, the methodology the Social Security Administration uses to calculate the annual adjustment could leave most seniors financially vulnerable, according to Mary Johnson, policy analyst and editor at The Seniors Association. She said that’s because the strategy focuses heavily on gasoline and transportation costs — items retirees spend less money on compared to food, health care and housing. Johnson estimated that the average retiree benefit of $1,656 per month is short at $43.80 per month on average, and a total of $417.60 per year so far, given relevant inflation data. For 2022, the average annual inflation rate among urban wage earners and book workers was 9%.
“Evidence is that COLA will not reflect pockets of persistently high inflation affecting retired and disabled Social Security recipients,” Johnson wrote in a recent note. This puts tens of millions of retirees at risk of being left behind.”
A Social Security Administration spokesperson did not immediately respond to an email request for comment.
The Federal Reserve has acknowledged the pain that inflation inflicts on individuals receiving Social Security benefits.
“Everyone – especially those with fixed incomes and at the bottom of the income distribution – is better off with stable prices,” Federal Reserve Chairman Jerome Powell said in a speech in May. “So we need to do everything we can to restore stable prices. We will do that as quickly and effectively as possible.”
The Fed sought to tackle inflation Through a series of interest rate hikes To calm demand in the economy.
Johnson wrote that retirees and people with fixed incomes indicated that they were spending their savings to keep pace with price increases, leaving them financially vulnerable. The expected cost of living adjustment may still be insufficient.
“The lifeboat is leaking and sucking up water, leaving older Americans at risk of financial drowning,” Johnson wrote.
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