Millions of Social Security beneficiaries will get an 8.7% increase in their benefits in 2023.
That’s a historic rise and good news for American retirees and others, but it’s tempered by the fact that it’s fueled by high inflation that has pushed up the cost of daily living.
The cost-of-living adjustment means the average beneficiary will receive more than an extra $140 a month beginning in January, according to estimates released Thursday by the Social Security Administration.
The profit boost. the largest in 40 years, it will be combined with a 3% drop in Medicare Part B premiums, meaning retirees will get the full hit of the jump in Social Security benefits.
“This year’s substantial Social Security cost-of-living adjustment is the first time in more than a decade that Medicare premiums have not increased and shows that we can provide more support to older Americans with the benefits they’ve earned.” said Social Security. Acting Commissioner of the Kilolo Kijakaz Administration.
However, a separate government report showed that inflation has recently accelerated, a trend that affects Social Security earnings for seniors. The Consumer Price Index rose 0.4 percent in September after just 0.1 percent in August and has risen 8.2 percent in the past 12 months. Applications for unemployment benefits increased during the week.
Stock prices fell sharply as Wall Street opened.
Social Security’s announcement came just weeks before the midterm elections, and at a time when Democrats and Republicans are arguing about high prices now and how best to financially shore up the program in the future.
President Joe Biden has pledged to protect both Social Security and Medicare. “I will make them stronger,” he said last month. “And I will reduce their cost so I can keep them.”
About 70 million people, including retirees, the disabled and children, receive Social Security benefits. This will be the biggest increase in benefits ever seen by baby boomers, those born between the years 1946 and 1964.
Willie Clark, 65, of Waukegan, Illinois, says his budget is “really tight” and that the increase in his Social Security disability benefits could give him some breathing room to cover the cost of household expenses he’s been delaying.
Still, he doubts how much of the extra money will end up in his pocket. His rent in an apartment building subsidized by the US Department of Housing and Urban Development is based on his income, so she hopes it will increase as well.
Social Security is funded by payroll taxes collected from workers and their employers. The maximum amount of income subject to Social Security payroll taxes for 2023 is $160,200.
The funding establishment dates to the 1930s, the brainchild of President Franklin D. Roosevelt, who believed that a payroll tax would foster among average Americans a sense of ownership that would protect the program from political interference.
Next year’s higher payment, without a concomitant increase in Social Security contributions, could put additional pressure on a system facing serious deficits for years to come.
The annual report from the trustees of Social Security and Medicare released in June says the program’s trust fund will not be able to pay full benefits beginning in 2035.
If the trust fund is depleted, the government will be able to pay only 80% of scheduled benefits, according to the report. Medicare may pay 90% of total scheduled benefits if the fund is exhausted.
In January, a Pew Research Center survey showed that 57% of US adults said “taking action to make the Social Security system financially sound” was one of the top priorities the president and Congress were to address this year. Securing Social Security garnered bipartisan support, with 56% of Democrats and 58% of Republicans calling it a top priority.
Some solutions have been proposed to reform Social Security, but none have advanced in a highly partisan Congress.
Earlier this year, Sen. Florida Republican Rick Scott issued a detailed plan that would require Congress to come up with a proposal to adequately fund Social Security and Medicare or potentially eliminate them.
Senate Minority Leader Mitch McConnell, R-Kentucky, has publicly rebuked the plan, and Biden has used Scott’s proposal as a political blackjack against Republicans ahead of the midterm elections.
“If Republicans in Congress have their way, seniors will pay more for prescription drugs and their Social Security benefits will never be secure,” Jean-Pierre said.
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