What you need to know about increasing your new Social Security benefits

For the 70 million Americans receiving Social Security, experts say the big increase in benefits scheduled for 2023 is highly anticipated and much welcomed.

Read more: Increasing the cost of living in Social Security will help millions of children and their caregivers

Social Security recipients, most of whom are over 65, have seen their payments increase nearly every year for more than four decades to keep up with the cost of inflation. When inflation is low — as it has over the past decade or so — cost-of-living adjustments, or COLAs, have been fairly moderate. But last year the increase was significant, and this year it has been even greater.

To help cover the rising cost of food, housing, health care and other necessities, the Social Security Administration announced Thursday that beneficiaries will receive an 8.7 percent increase in their monthly payments. in the sign of it The Fed’s efforts have not yet succeeded in breaking through the high rate of inflationBureau of Labor Statistics also On Thursday, it released its consumer price index for SeptemberPrices are up 8.2 percent from last year, he said.

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The 8.7 percent increase in the cost of living for Social Security payments for 2023 will be the biggest jump in more than 40 years.

The 2023 COLA is the largest increase since 1981 – when inflation was higher than it is today – and the fourth largest on record.

Here’s a look at how the new COLA is calculated, how it will affect individuals receiving Social Security benefits and what problems these people may still face.

How is COLA calculated?

William Arnoni, chief executive of the National Academy of Social Security, said the cost-of-living increase is a purely mathematical formula — although it wasn’t always that way.

Social Security was established in the 1930s, but Congress first increased Social Security payments in 1950, and has continued to do so every few years for more than two decades. According to SSA. In 1972, President Richard Nixon signed a ruling into law That the annual increase is linked to consumer prices.

Since then, the Bureau of Labor Statistics has been comparing the average CPI for workers for July, August and September of this year with the average figure for the previous year. This percent change then becomes the annual increase in Social Security payments, According to the Social Security Administration. COLAs It can’t be negative; If there was a decrease in the percentage change, there would be no COLA.

Inflation was already starting to rise by the end of 2020, which is why payments jumped 5.9 percent in 2021. With prices rising in 2022, a major cost-of-living adjustment was expected before it was confirmed on Thursday.

How will increasing Social Security help people?

Experts say the impact could be huge. The average retiree would see a monthly increase of about $144 in payments, according to the SSA, and the average monthly payment for a retired beneficiary would be $1,827.

More than 70 million Americans who receive Social Security payments, Supplemental Security Income payments, or both will start seeing this increase starting in December or January.

According to the SSA, 55 percent of Social Security recipients in 2021 were women. And although the vast majority of these Americans are retired, about 3 million children also receive Social Security payments. Others receiving payments include people with disabilities and people who have lost spouses.

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Of the 70 million Americans receiving Social Security benefits, more than three-quarters are 65 or older.

The estimated average payment for a widow with two children will jump from $3,238 to $3,520, According to SSAThe median wage for disabled workers will increase from $1,364 to $1,483.

Another important change would be lower Medicare Part B premiums, said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.

“We’ve never seen this combination, and this may be the only time we’ll ever see it,” Johnson said. “So I encourage everyone to appreciate that.”

Johnson said many people expect their Medicare premiums to eat up a large portion of their COLA, but that won’t be the case this year.

She said low-income people are still suffering from high prices, and an increase in the cost of living will not alleviate that entirely. She added that the amazing jump in payments will definitely help people, especially since Increase heating cost And winter is approaching.

“I encourage people to contact their local family services department [and] Medicaid offices to learn more about heating and fuel assistance programs for low-income people and apply for them now. This is the time of year to do that.

Why modification is not an ideal solution to the rising costs of the elderly

It is not clear now whether higher Social Security payments will contribute to soaring inflation. But Arnoni said seniors are more likely to spend money than save it, giving his foundation “a clear sense that it will help mitigate the recession.”

Johnson said the cost of inflation each month this year far exceeded the 5.9 percent cost-of-living increase set at the end of 2021. That means last year’s COLA does not meet current economic pressures.

Watch: Inflation remains stubbornly high despite Fed efforts to stabilize costs

Arnoni said Social Security benefits are a one-size-fits-all solution, but people’s real needs vary with geography, race, age and other demographic differences. Older people tend to be more affected by inflation than younger adults.

“They have a tendency to pay for things that are in the higher inflation categories, and health care is the first example,” Arnoni said. The cost of eye care, for example, rose 3.2 percent from August to September, the largest increase ever, According to the Associated Press,.

One downside of the way COLA is calculated, Arnoni said, is that it is based on the consumer price index for workers, which doesn’t always reflect how seniors spend their money.

pointed to elderly index, a research project from the Institute of Gerontology at the University of Massachusetts Boston, as a potentially more accurate measure of how seniors are struggling financially with housing, transportation, health care, and food costs. But while the indicator is “gaining traction,” he said, “everything is hypothetical at this point.”

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