The Social Security Administration is expected to announce on Thursday a cost-of-living adjustment, or COLA, of at least 8%, which will translate into higher monthly payments to your beneficiaries.
It's the biggest adjustment in decades, and it
's good news for retirees, people with disabilities and other
Social Security beneficiaries.
However, the concern remains that, due to the rampant inflation that the US economy is going through, the increase in payments will not necessarily translate into a higher purchasing power.
We explain all the details:
How many people will it affect?
The measure will affect the more than 65 million Social Security beneficiaries.
Will it be the biggest increase in history?
No, but the annual adjustment is expected to be the largest one-time increase in 40 years, since 1981, and the largest experienced by beneficiaries alive today.
Is the increase to offset inflation?
That is the intention.
As Americans have painfully realized in the past year, money goes as far as it used to.
The Federal Reserve has recognized the pain that inflation inflicts on individuals receiving Social Security benefits.
“Everyone — especially people on fixed incomes and at the bottom of the income distribution — prefers price stability,” Fed Chairman Jerome Powell said in a May speech.
“And so we have to do everything we can to restore price stability.
We will do it as quickly and efficiently as we can."
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How much will the adjustment be and when will it be reflected?
The League of the Third Age, a non-profit organization,
foresees an adjustment of 8.7%,
which implies that Social Security beneficiaries could see an increase of about
144 dollars as of January 1, 2023
, as published. NBCNews.
The increase that took effect this year was 5.9%.
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What do the beneficiaries have to do to get it?
Any.
How is the increase calculated?
The annual adjustment is calculated by averaging the inflation readings among urban wage earners and white-collar workers for July, August, and September.
Inflation readings in those first two months were roughly 9.1% and 8.6%.
If the increase is based on inflation in urban areas, will people in rural areas receive the same increase?
Yes. “The COLA doesn't take into account where you live or your actual spending patterns,”
William Arnone, CEO of the National Academy of Social Security , told
The Associated Press .
“For some people, there is an exaggeration in the cost of living.
For example, in small cities in the Midwest compared to urban areas like New York, DC, or Chicago.
Since many older people choose to live in suburban or rural areas,
some will benefit more” than others from the same increase.
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Will the increase solve the problem of inflation?
No. Despite the projected increase, the methodology Social Security uses to calculate the annual adjustment could still leave most
seniors
financially vulnerable, Mary Johnson, a political analyst and editor of the League, told NBC News. of the third Age.
That's because the strategy puts too much emphasis on gasoline and transportation costs, he noted, items on which retirees spend less money compared to food, health care and housing.
“Indications are that the COLA will not reflect pockets of persistently high inflation affecting retired and disabled Social Security recipients,” Johnson wrote in a recent note.
"That puts tens of millions of retirees at risk of falling further behind."
Johnson wrote that retirees and people on fixed incomes have indicated they have been spending their savings to keep up with price increases, leaving them financially vulnerable.
And the anticipated cost-of-living adjustment may still be insufficient.
Will wealthy people get the same increase in Social Security?
Yes. Everyone will receive the same percentage raise, whether you have millions of dollars in retirement savings or little saved.
Do all retirees receive what they need to live?
Johnson has calculated that the average retiree payments of $1,656 a month are about
$43.80 a month short
, and a total of $417.60 so far this year, taking into account recent inflation data.
By 2022, the year-on-year inflation rate among urban wage earners and white-collar workers has been 9% on average.
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Will medical costs affect the 2023 COLA?
According to Johnson, Medicare premiums will remain flat or even decline this year due to a large increase last year linked to a new estimate of the cost of an Alzheimer's treatment.
"Such a redetermination of the existing Part B premium is unprecedented," Johnson wrote in an August memo.
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Will this make inflation worse?
It will put more cash in the hands of people who, for the most part, really need it, and are more likely to use it.
That will fuel the economy more, which
will help offset rising inflation a bit.
However, the Social Security boost will have less of an impact on the economy than previous government-provided stimulus packages, as bottlenecks in supply chains caused by business closures around the world and other factors have caused the worst inflation in decades, according to economists.
With information from
NBC News
and AP.
