Social Security benefits get a major boost: What you need to know

Social Security beneficiaries are about to get the biggest increase in their benefits in four decades.

2023 year cost of living adjustmentor COLA, will be 8.7%, the Social Security Administration announced on Thursday, October 13th.

Although the changes will take effect in December 2022, beneficiaries will not see a COLA increase until then their first social security checks of the new year, according to the SSA.

The adjustment followed the September Consumer Price Index report, which determined those prices rose 8.2% for the 12-month period ending in September, and 0.4% between August and September. The CPI was also announced on Thursday.

Here’s how the bigger benefits of 2023 will affect you.

Keeping up with inflation

Social Security benefits are adjusted annually for inflation.

“The change means that inflation no longer eats away at the cost of Social Security benefits,” the administration says.

The SSA uses the previous year’s consumer price index for urban wage and salary workers in July, August, and September to determine the next year’s COLA. For example, the 2023 COLA was determined based on the inflation rate of the last three months.

In December 2021, the administration enacted a 5.9% COLA for 2022which at the time was the biggest correction since 1982. However, inflation quickly outpaced this adjustment.

The latest adjustment is expected to help beneficiaries keep pace with rising prices.

As inflation continues to rise, beneficiaries need the most support for health care, housing and food, according to Mary Johnson, seniors’ welfare and health care analyst.

In September, increases in the cost of health care, housing and food contributed the most to inflation, according to the BLS. Over the past 12 months, medical care has become more expensive by 6.5%, housing by 6.6%, and food by 11.2%.

Lower Medicare premiums

The increased COLA usually does not take into account changes in Medicare payments, which are automatically deducted from benefits.

In years when the Medicare payment changes, usually an increase greater than the COLA, beneficiaries enrolled in Medicare Part B do not actually benefit from the higher COLA.

But in 2023, unlike previous years, Medicare beneficiaries will be able to keep their entire Social Security COLA.

Medicare Part B feewhich cover physician services, hospital outpatient services, some home health services, medical equipment and other services not covered by Part A, will decrease in 2023, according to the Centers for Medicare and Medicaid Services.

Medicare enrollees will receive a standard monthly premium of $164.90, down $5.20 from 2022, CMS announced Sept. 27. The annual deductible will drop by $7 to $226 in 2023.

The last one temporary premiums have decreased was in 2012, according to The New York Times.

The 2023 cut “is great news for seniors and people with disabilities who receive Medicare, most of whom have these premiums deducted directly from their Social Security benefits,” Nancy Altman, president of Social Security Works, said in a press release. release from September 27.

4 million children will also benefit

An estimated 4 million children receive social security assistanceaccording to AARP.

Children of retirees, the dead, and the disabled can receive benefits based on their parents’ incomes, AARP says. Grandchildren can also claim their grandparents’ benefits in some cases.

“We have to understand increase in COLA will have a positive net benefit for the entire family, not just senior family members,” said Maya Rockimour Cummings, Brookings Metro International Senior Fellow at the Brookings Institution and CEO of Global Policy Solutions, a social change strategy .firm, PBS News reported.

Low-income children and their families will benefit the most from the increase, Altman told PBS.

Insolvency on the horizon

While millions will benefit from the COLA increase, there are fears that the Social Security program will soon reach insolvency.

Giving beneficiaries more money now means less money for future generations, Committee for a Responsible Budget President Maya McGuiney said in an earlier interview with McClatchy News.

The fund that pays retirees and survivors benefits will run out of reserves by 2034, according to a 2022 report by the trustees of the Social Security and Medicare Trust Funds. After that, the fund will be able to pay only 77% of the planned payments.

Additionally, MacGuineas says the COLA increase “exacerbates the spiral and cycle of inflation.” As this cycle continues, the more likely it is that the United States will fall into a recession.

“If purchasing power continues to rise, that means more pressure on the Fed to raise interest rates,” McGuiney said.