Social Security Payments:Petrol, groceries and products are not the only things increasing in price these days. Likewise, so are Social Security benefits.
In 2023, retirees will receive much-needed financial relief, despite the fact that inflation is causing millions of Americans to reduce their expenditures. The U.S. government announced on October 13 that Social Security recipients will receive a cost-of-living adjustment (COLA) of 8.7%. It represents the largest increase in Social Security payments in forty years.
The 8.7% COLA increase that will take effect in January could add $140 or more to the monthly income of Social Security recipients.
Why is Social Security Payments Increasing?
When costs increase, COLAs also increase.
Since 1975, Social Security benefits have been evaluated and recalculated annually to account for inflation. It’s a method for preserving the purchasing power of payments so they don’t lose vigour as prices rise. However, there is no COLA if there is no inflation, as in 2009, 2010, and 2015.
To determine the annual COLA, the Social Security Administration (SSA) analyses data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures the average cost variations for a variety of common products and services, such as food and clothing.3Social Security benefits will increase if there is at least a 0.1% increase when comparing the third quarter statistics to the same period from the previous year (July, August, and September).
In 1980, when the COLA skyrocketed to 14.3%, the largest increase in history occurred.
Will my Social Security benefits increase in 2023?
Seventy percent of individuals elect to have their Medicare Part B premiums deducted automatically from their Social Security checks.5If you fall into this category, there is a possibility that a Medicare premium increase could offset any cost-of-living adjustment bonuses you receive.
However, after increasing by 14.5% from 2021 to 2022, Part B premiums will decrease by $5.20 in 2023. Even with the change, you should continue to monitor your premiums.
Additionally, a higher COLA may be detrimental to certain individuals. If you are a low-income senior, a larger Social Security benefit could place more money in your pocket. However, it could place you over the legal income limit for certain government assistance programmes, such as food stamps, or even require you to pay taxes on your benefits.
Will a larger pension be sufficient to finance my retirement?
Approximately 65 million Americans received Social Security payments in 2021, according to the SSA’s most recent report. Even after a 5.9% COLA last year, the average benefit is presently around $1,550 per month.
However, Social Security was never designed to be a person’s sole or most conspicuous source of income once retired. According to many financial experts, you’ll need to have saved about 80% of your working income to cover your living expenses in retirement, with Social Security contributing a portion because it’s dependent on your lifetime earnings. Contributing to a 401(k) plan, an IRA, or another tax-advantaged form of investment account can help you build your nest egg.
What if I do not intend to collect Social Security benefits in 2023?
At age 62, you can begin receiving Social Security benefits. However, if you are not prepared to file in 2023, you may be able to enjoy the best of both environments. The longer you wait to claim, not only will your benefits increase, but you will also be eligible for next year’s estimated COLA increase. Even if you don’t register until age 70, you become eligible for COLA increases the year you turn 62. This is due to the fact that “inflation adjustments are baked into future payments” until you ultimately receive.
How do I log in to my account?
Visit ssa.gov to administer your account or, if you haven’t already, to set up a username and passwordp’ss’s’s’s just you’s. You will be able to view your profile page, earnings history, and estimated benefits after logging in.