Millions of Social Security recipients will receive an 8.7% increase in their benefits in 2023.
This is a historic increase and welcome news for American retirees and others – but it has been tempered by the fact that it is fueled by record-high inflation that has driven up the cost of everyday living.
The cost-of-living adjustment means the average recipient will receive an extra $140 per month starting in January, according to estimates released Thursday by the Social Security Administration.
The benefit increase will be coupled with a 3% decrease in Medicare Part B premiums, meaning retirees will get the full effect of the jump in Social Security benefits.
Acting Social Security Administration Commissioner Kilulu Kigakazi said that along with health insurance premiums that will fall in 2023, increasing Social Security benefits will “give seniors more peace of mind and breathing room.”
“This year’s Social Security cost-of-living adjustment is the first time in more than a decade that Medicare premiums have not gone up and shows that we can provide more support to older Americans who are dependent on their benefits,” she said.
The announcement comes just weeks before the midterm elections, and at a time when Democrats and Republicans are arguing about higher prices now and how best to financially support the program in the future.
President Joe Biden has pledged to protect Social Security and Medicare. “I will make them stronger,” he said last month. “And I’ll lower your cost so I can keep it.”
The combination of enhanced Social Security benefits and lower Medicare premiums will give seniors a chance to beat inflation, White House Press Secretary Karen Jean-Pierre said in a statement on Wednesday. “We will put more money in their pockets and give them extra breathing space,” she said.
About 70 million people — including retirees, the disabled, and children — receive Social Security benefits. This would be the largest increase in benefits experienced by those born between 1946 and 1964.
Willie Clark, 65, of Waukegan, Illinois, says his budget is “very tight” and an increase in his Social Security disability benefit could give him some breathing space to cover the cost of household expenses he’s been putting off.
However, he doubts how much extra money will end up in his pocket. His rent in a US Department of Housing and Urban Development subsidized apartment building depends on his income, so he expects that to rise as well.
Social Security is funded by payroll taxes collected from workers and their employers. They each pay 6.2% on wages up to the maximum, which is adjusted each year for inflation. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $155,100.
The funding setup dates back to the 1930s and is the brainchild of President Franklin D. Roosevelt, who believed that a payroll tax would foster in ordinary Americans a sense of ownership that would protect the program from political interference.
Higher payments next year, without a concomitant increase in Social Security contributions, could put additional pressure on a system facing severe deficits in the coming years.
The annual Social Security and Medicare Trustees report released in June says the trust fund for the program will not be able to pay full benefits starting in 2035.
If the trust fund runs out, the government will be able to pay only 80% of the planned benefits, the report said. Medicare will be able to pay 90% of the total assessed benefits if the fund runs out.
In January, a Pew Research Center survey found that 57% of US adults say “taking steps to make the Social Security system financially sound” was a top priority for the president and Congress to speak out this year. Social Security insurance had bipartisan support, with 56% of Democrats and 58% of Republicans calling it a top priority.
Some solutions for Social Security reform have been proposed — but none have moved forward in the sharply partisan Congress.
Earlier this year, Senator Rick Scott, R-Fla., released a detailed plan that would require Congress to come up with a proposal to adequately fund Social Security and Medicare or perhaps phase it out.
Senate Minority Leader Mitch McConnell, a Kentucky Republican, publicly rebuked the plan and used Biden’s Scott proposal as a political hit against Republicans ahead of the midterm elections.
“If the Republicans in Congress get what they want, seniors will pay more for prescription drugs and their Social Security benefits will never be safe,” Jean-Pierre said.
Copyright © 2022 by The Associated Press. All rights reserved.
.
[ad_2]
