WASHINGTON — Millions of Social Security recipients will get an 8.7% increase in their benefits in 2023, a historic increase but a gain that will be partly swallowed up by the rising cost of daily living.
The cost-of-living adjustment — the largest in more than 40 years — means the average recipient will receive more than $140 extra per month starting in January, the Social Security Administration announced Thursday.
While Social Security recipients welcomed the increase in benefits, many said it was not enough to cover the impact of inflation.
It’s “not much help,” said Shirley Parker, 85, who lives in Chatham, Chicago’s South End,
Home maintenance costs and high grocery prices are taking a toll on his budget. “The food is ridiculous. I go out with a bag full of groceries — $50 — I don’t have about 10 items,” she said.
The Social Security COLA was created to help seniors and other beneficiaries manage the higher cost of food, fuel, and other goods and services. Its effectiveness depends on the evolution of inflation.
A separate government report released on Thursday showed a further acceleration in inflation. The consumer price index rose 0.4% in September after just 0.1% in August and rose 8.2% over the past 12 months. Jobless claims increased over the week.
The stock market opened lower on inflation news but rallied at midday.
The Social Security Administration said the estimated average monthly Social Security benefit for all retired workers will be $1,827 starting in January, according to an agency fact sheet.
The increase in Social Security benefits will be associated with a 3% drop in Medicare Part B premiums, meaning that retirees will fully benefit from the increase in Social Security.
“This year’s significant Social Security cost-of-living adjustment is the first time in more than a decade that Medicare premiums aren’t rising and shows we can provide more support to older Americans who matter. on the benefits they’ve earned,” Social Security said. Acting Commissioner of Administration Kilolo Kijakazi.
Colby Nelson, spokesman for AARP, said the increased benefits “will bring much-needed relief to millions of Americans.” He called the annual rise in the cost of living “more critical than ever, as high inflation remains a problem for older Americans.”
Several government indices show that inflation is hitting older Americans harder than the rest of the population. Medical costs represent a significant part of the burden.
The Social Security announcement comes just weeks before the midterm elections, and at a time when Democrats and Republicans are currently clashing over high prices and how best to financially shore up the program in the future. coming.
President Joe Biden has pledged to protect both Social Security and Medicare. “I will make them stronger,” he said last month. “And I’ll cut your costs so I can keep them.”
William Arnone, chief executive of the National Academy of Social Insurance, a social security advocacy organization, said Thursday’s announcement was “no cause for celebration” because the benefit will not help all beneficiaries to catch up with the impact of inflation, especially if price increases continue in 2023.
“There are already indications that health care inflation will explode next year,” Arnone said.
Margaret Toman, a 78-year-old woman in Garner, North Carolina, who had stopped working to care for her late mother, described the 8.7% increase as “pretty miserly”.
“I think most of us who are older and get Social Security are grateful for that Social Security,” she said. “But that gratitude sometimes hides or replaces a certain sense of anger at having contributed to a system for so long and still struggling to survive.”
Around 70 million people, including pensioners, people with disabilities and children, receive social security benefits. It will be the largest increase in benefits baby boomers, those born between 1946 and 1964, have ever seen. The last time a COLA was higher was in 1981, at 11.2%.
Willie Clark, 65, of Waukegan, Illinois, says his budget is ‘really tight’ and increasing his Social Security disability benefits could give him some breathing room to cover the cost of household expenses which he delayed.
Yet he doubts how much extra money will end up in his pocket. His rent in a building subsidized by the US Department of Housing and Urban Development is based on his income, so he expects that to rise as well.
Social security is financed by social charges levied on workers and their employers. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $160,200.
The funding configuration dates back to the 1930s, the brainchild of President Franklin D. Roosevelt, who believed that a payroll tax would foster a sense of belonging among average Americans that would shield 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 a serious deficit in the years to come.
The Social Security and Medicare trustees’ annual report released in June says the program’s trust fund will not be able to pay full benefits from 2035.
If the trust fund is exhausted, the government will only be able to pay 80% of the planned benefits, according to the report. Medicare will be able to pay 90% of the total scheduled benefits if the fund is exhausted.
In January, a Pew Research Center poll showed that 57% of American adults said “taking steps to make the Social Security system financially sound” was a top priority for the president and Congress this year. Securing Social Security has won bipartisan support, with 56% of Democrats and 58% of Republicans calling it a top priority.
Some solutions to reforming Social Security have been proposed — but none have advanced in a heavily partisan Congress.
House Speaker Nancy Pelosi said Thursday that the COLA announcement is a reminder that “extreme MAGA Republicans are openly plotting new plans to cut seniors’ benefits and raise their costs — including threatening to provoke an economic disaster by holding the debt limit hostage for their toxic agenda.”
Earlier this year, Sen. Rick Scott, R-Fla., released a blueprint that would require Congress to introduce a proposal to adequately fund Social Security and Medicare or possibly phase them out.
Senate Minority Leader Mitch McConnell, R-Ky., publicly chastised the plan, and Biden used Scott’s proposal as a political bludgeon against Republicans ahead of the midterm elections.
“If Republicans in Congress are successful, seniors will pay more for prescription drugs and their Social Security benefits will never be secure,” Jean-Pierre said.
Claire Savage in Chicago and Hannah Schoenbaum in Raleigh, North Carolina contributed to this report.
Follow the AP’s inflation coverage: https://apnews.com/hub/inflation