Social Security benefits to rise by 8.7 percent in 2023

INDONESIAKININEWS.COM -  The Social Security Administration on Thursday announced an 8.7 percent increase in benefit checks for seniors star...

The Social Security Administration on Thursday announced an 8.7 percent increase in benefit checks for seniors starting next year, a response to the fastest U.S. inflation in four decades.

The change will affect about 70.3 million Social Security beneficiaries, including roughly 8 million Supplemental Security Income recipients. The adjustment will increase monthly Social Security checks by about $145 per month on average, according to AARP, which represents seniors.

Social Security is the largest source of retirement income for U.S. seniors, but rapid price increases over the past year have diminished the value of that income as well as that of other payments. The increase will help seniors adjust to higher living costs, but it also will further strain Social Security’s finances, bringing forward the date by which the program’s trust fund is projected to be exhausted.

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The increase announced Thursday is the largest rise in Social Security payments in roughly four decades. The Social Security Administration increased the program’s benefits by 5.9 percent at the beginning of this year in response to lower — but still substantial — inflation in 2021. The change is known as a cost of living adjustment, or COLA.

“The guaranteed benefits provided by Social Security, including the annual COLA, are more crucial than ever, as high inflation remains a problem for older Americans,” said Jo Ann Jenkins, the chief executive of AARP, in a statement. “The automatic adjustment is an essential part of Social Security that helps ensure the benefit does not erode over time due to rising prices.”

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The Social Security announcement came out around the same time the federal government released a separate monthly report on inflation. Inflation has swamped the Biden presidency and amounted to one of the biggest problems in the U.S. economy, with wages failing to keep pace with price increases. Still, the Social Security adjustment could bring a political benefit to the Biden administration, which will be sending out bigger checks to millions of American seniors.

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Anqi Chen, the assistant director of savings research at the Center for Retirement Research at Boston College, said the automatic adjustment is particularly important because much of the other sources of seniors’ retirement income does not adjust for inflation. About half of the retirement income of middle-class retirees comes from Social Security, Chen said, but much of the other half comes from their 401(k) and IRA disbursements — which are tied to investment returns.

The federal government started indexing Social Security for inflation in the 1970s, she added.

“A lot of stories say retirees are on a fixed income, but they’re not, because Social Security is indexed for inflation and that’s a wonderful feature,” Chen said.

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Most federal government retirees will receive the same increase. The rest are primarily set to receive a 7.7 percent boost.

Those who retired under the Civil Service Retirement System, which generally covers hires before 1984, get an adjustment matching the Social Security figure regardless of their age. Those hired from 1984 on are in the Federal Employees Retirement System, which uses a different calculation. The upcoming inflation adjustments will increase the average monthly benefit for a CSRS retiree by about $380 and by about $140 for a FERS retiree.

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Alex Lawson, the executive director of Social Security Works, which advocates expansion of the program, also pointed to lower Medicare premiums resulting from a Biden administration decision to narrow coverage of a controversial drug that had driven premium increases in 2022. That change, which takes effect next year, will help seniors keep more of the additional Social Security benefits than they otherwise would have been able to do. Lawson urged the administration to go further in reining in pharmaceutical giants to bring down seniors’ costs.

“Medicare Part B premiums are dropping next year, meaning Social Security beneficiaries will get to keep this increase instead of handing it over to Big Pharma,” Lawson said. “The Biden administration should take executive action to build on the Inflation Reduction Act’s drug pricing reforms and bust Pharma monopolies.”

White House press secretary Karine Jean-Pierre also touted the changes to Medicare in a statement Wednesday, saying: “Seniors will have a chance to get ahead of inflation, due to the rare combination of rising benefits and falling premiums. We will put more money in their pockets and provide them with a little extra breathing room.”

Conservatives bemoaned the higher payments, pointing out that Social Security ran a deficit of $127 billion in 2021 and could exhaust its trust fund under existing projections by 2034. Romina Boccia, the director of budget and entitlement policy at the Cato Institute, a libertarian think tank, said the index used by Social Security to calculate the benefits is too generous and should be changed.

“Social Security is using an outdated measure that’s driving up benefit costs,” Boccia said in a statement before the announcement of the adjustment. “Reform is long overdue.”

Source: washingtonpost


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IndonesiaKiniNews.com: Social Security benefits to rise by 8.7 percent in 2023
Social Security benefits to rise by 8.7 percent in 2023
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