Social security COLA: Seniors will soon receive a substantial cost-of-living allowance



CNN

Seniors and other Social Security recipients will get a heftier monthly benefit starting next month under an 8.7% annual cost-of-living adjustment designed to help them cope with high inflation.

The increase, the largest in more than 40 years, will increase retirees’ monthly payments by more than $140 to an estimated $1,827 average for 2023.

The adjustment is the highest most current beneficiaries have seen, as it is based on an inflation measure from August to October, which also hit about 40-year highs. Since then, inflation has cooled somewhat, although prices remain high.

“I’m sure everyone is eagerly awaiting because prices are still high,” said Mary Johnson, a Social Security and Medicare analyst at the Senior Citizens League, an advocacy group. “Just shopping for groceries to feed people during the holidays is going to be a big challenge.”

About 70 million people will receive the increase, which follows a 5.9% adjustment for 2022.

Many seniors are heavily dependent on Social Security. About 42% of older women and 37% of older men depend on the monthly payments for at least half of their income, according to the Social Security Administration.

When the top-up payment arrives depends on the recipient’s age and date of birth. Those who received Social Security before May 1997 receive their monthly benefit on the 3rd of each month. For younger retirees, those whose date of birth is the 1st-10th of the month receive it on the second Wednesday, while those born on the 11th-20th and 21st-31st of the month receive it on the third and fourth Wednesday, respectively get paid .

Although beneficiaries received a sizeable adjustment for this year, inflation has eaten away at the rebound.

The increase lagged actual inflation on average by more than $42 — or 46% — per month, or about $508 per year, Johnson said.

Many retirees have been forced to draw on their savings or welfare. A third of seniors said they had signed up for food stamps or visited a pantry in the past 12 months, compared with 22% in 2020, according to recent Senior Citizens League polls. Also, 17% have applied for a heating subsidy, compared to 10% in 2020.

This is not a new problem. Benefits have not kept pace with the rising cost of living for years, even with annual adjustments.

Since March, inflation has caused Social Security payments to lose 40% of their purchasing power since 2000, according to a study released by the league earlier this year. Monthly benefits would need to increase by $540 to keep purchasing power at the same level as in 2000.

Seniors, too, will see their Medicare Part B premiums fall in 2023, the first time in more than a decade that the loss will be lower than the year before, the Centers for Medicare and Medicaid Services announced this fall. It’s only the fourth time premiums have decreased since Medicare’s inception in 1965.

Standard monthly premiums will be $164.90 in 2023, down $5.20 from 2022.

The reduction follows a sharp increase in premiums in 2022 that increased the standard monthly premium to $170.10 from $148.50 in 2021. A key driver of the 2022 increase was a projected jump in spending due to a costly new drug for Alzheimer’s disease, Aduhelm. Since then, however, the maker of Aduhelm has lowered the price, and the Centers for Medicare and Medicaid Services have restricted coverage of the drug.

Also, spending on other Part B items and services was lower than forecast, resulting in much larger reserves in the Part B trust fund, allowing the agency to limit future premium increases.

The big annual adjustment could end up hurting some seniors, Johnson said.

For example, the resulting increase in income could push them above the thresholds for certain government benefits such as Medicare Extra Help, Medicaid, meal stamps, and rent subsidies, leaving them with fewer or no benefits. Or they’ll have to pay more for their Medicare Part B premiums, which are income-adjusted.

They may also have to pay taxes — or owe more — on their Social Security benefits if their income exceeds a certain level.

In addition, the increase could leave Social Security’s finances in even more shaky ground. The combined trust funds, which pay retiree, survivor and disability benefits, will be exhausted by 2035, leaving only about three-quarters of the promised payments to distribute unless Congress fixes the program’s long-term funding shortfall, according to recent Social Security trustees ‘ Report.

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