While inflation is pounding folks at the gas pump and the checkout stand, it’s not all bad news for older adults on a fixed income. Because inflation is so high, Social Security benefits are poised to get the biggest bump in more than 40 years.
The cost of living adjustment for 2023 is a remarkable 8.7% boost.
But don’t expect America’s older adults to go on a spending spree to to celebrate.
Prices of basics like electricity are still rising. As NPR reported, “Relief might not be coming soon. On Tuesday, the Energy Department warned that electric heating bills will likely be 10% higher this winter than last. For families who heat with natural gas, the increase could be 28%.”
The cost of rent around the country keeps going up. And as OPEC+ has been reducing production, gas prices aren’t plunging either.
The Social Security increase is an automatic cost-of-living adjustment in January that’s set based on the inflation rate the previous July, August and September, compared to the same months the year before. NPR notes that when inflation’s stable, “it’s a trivial adjustment.” Sometimes, benefits don’t increase at all.
This bump could average about $141 more in Social Security benefits each month.
The U.S. Bureau of Labor Statistics reported Thursday that over the last year, inflation rose 8.2% before seasonal adjustment. And it said increases in the cost of shelter, food and medical care were the biggest contributors, though those were partially offset by a 4.9% decline in the cost of gasoline.
In September, “the indexes for shelter, medical care, motor vehicle insurance, new vehicles, household furnishings and operations, and education were among those that increased over the month.” A few declined, including used cars, trucks, apparel and communication, it said.
A little bad news
MarketWatch points out that there are “two twists,” however, to the Social Security income boost.
First, the COLA given in January is “effectively a year in arrears: You will get a benefit bump in 2023 to account for a rise in prices that took place between 2021-2022 and was already hitting your budget earlier this year,” MarketWatch says.
The second is more complicated.
According to the article, “Inflation will push even more retirees into the unhappy situation where their benefits are taxed (or, more accurately, double taxed). Congress introduced the taxation of Social Security benefits in 1984, but cleverly declined to index the thresholds to inflation. A tax that was supposed to hit only the highest 10% of recipients now hits about half, and will in due course, hit most.”
Social Security is a safety net program for older adults, disabled workers and surviving spouses and children. Roughly 70 million people receive some type of Social Security benefit, with the amount tied to an eligible individual’s earnings history. The average benefit is $1,625 per month. And for 20% of those receiving Social Security, that’s pretty much what they live on.
For those who have investment income, the rise in Social Security benefits could be countered badly by a drop from investment income. The stock market’s not soaring as the Federal Reserve raises interest rates to try to counter high inflation.
But federal officials are touting this and other price changes in government programs that serve older adults.
Social Security ‘s acting commissioner, Kilolo Kijakazi, noted on the agency’s blog that “Medicare premiums are going down and Social Security benefits are going up in 2023, which will give seniors more peace of mind and breathing room.”
While it’s true that Medicare Part B premiums are dropping slightly, as the Deseret News reported in late September, officials are not heralding the fact that deductibles and co-payments are increasing.
The Medicare Part B outpatient coverage premium will drop by 3% for the first time in more than a decade, saving the average beneficiary $5.20. The annual deductible’s dropping $7. But Medicare’s Part A (hospitalization) deductible is going up $44 and so are co-insurance costs if someone is hospitalized.
Medicare.gov points out that “there’s no yearly limit on what you pay out-of-pocket, unless you have supplemental coverage, like a Medicare Supplement Insurance (Medigap) policy, or you join a Medicare Advantage Plan.”