Millions of Social Security recipients will get an 8.7% boost in their benefits in 2023, a historic increase but a gain that will be eaten up in part by the rising cost of everyday living.
The cost-of living adjustment — the largest in more than 40 years — means the average recipient will receive more than $140 extra a month beginning in January, the Social Security Administration said Thursday.
While Social Security recipients welcomed the benefit increase, many said it wasn’t enough to cover the impact of inflation.
Some organizations are saying the increase will not be enough for many senior citizens, given that the Consumer Price Index has surged more than 8% over the last 12 months, the biggest jump in four decades.
In a statement, the President and CEO of the National Council on Aging Ramesy Alwin said: "While this increase is historic and needed, it is also inadequate for the millions of older Americans who face skyrocketing housing and health care costs across the country."
The Social Security Administration said the estimated average monthly Social Security benefit for all retired workers will be $1,827 starting in January, according to an agency fact sheet.
The boost in Social Security benefits will be coupled with a 3% drop in Medicare Part B premiums, meaning retirees will get the full impact of the Social Security increase.
"This year's substantial Social Security cost-of-living adjustment is the first time in over a decade that Medicare premiums are not rising and shows that we can provide more support to older Americans who count on the benefits they have earned," said Social Security Administration's Acting Commissioner Kilolo Kijakaz.
However, a separate government report showed inflation newly accelerating, a trend eating into the Social Security gains for older people. The Consumer Price Index rose 0.4 percent for September after just 0.1 percent in August and is up 8.2 percent for the past 12 months. Jobless claims for unemployment benefits rose for the week.
President Joe Biden on Thursday afternoon echoed the sentiment that the Medicare premium reduction would have some impact on retirees’ wallets.
“Seniors are gonna get ahead of inflation next year,” Biden said. “For the first time in 10 years, their Social Security checks will go up while their Medicare premiums go down.”
"This is really an important day. This is good news. This means that they will have more money in their pockets and it's way important to remember that for retirees especially, this is probably their only source of income that will be adjusted every year for inflation," Cristina Martin-Firvida, AARP Vice President of Government Affairs, told Spectrum News.
Several government indexes show that inflation hits older Americans harder than the rest of the population. Medical costs are a big part of the burden.
The Social Security announcement comes just weeks before the midterm elections, and at a time when Democrats and Republicans are sparring about high prices now and how best to shore up the program financially in the future.
President Biden has pledged to protect both Social Security and Medicare. "I'll make them stronger," he said last month. "And I'll lower your cost to be able to keep them."
About 70 million people — including retirees, disabled people and children — receive Social Security benefits. This will be the biggest increase in benefits that baby boomers, those born between the years 1946 and 1964, have ever seen.
Social Security is financed by payroll taxes collected from workers and their employers. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $160,200.
The financing setup dates to the 1930s, the brainchild of President Franklin D. Roosevelt, who believed a payroll tax would foster among average Americans a sense of ownership that would protect the program from political interference.
Next year's higher payout, without an accompanying increase in Social Security contributions, could put additional pressure on a system that's facing a severe shortfall in coming years.
The annual Social Security and Medicare trustees report released in June says the program's trust fund will be unable to pay full benefits beginning in 2035.
If the trust fund is depleted, the government will be able to pay only 80% of scheduled benefits, the report said. Medicare will be able to pay 90% of total scheduled benefits if the fund is depleted.
In January, a Pew Research Center poll showed 57% of U.S. adults saying that "taking steps to make the Social Security system financially sound" was a top priority for the president and Congress to address this year. Securing Social Security got bipartisan support, with 56% of Democrats and 58% of Republicans calling it a top priority.
Some solutions for reforming Social Security have been proposed, but none has moved forward in a sharply partisan Congress.
House Speaker Nancy Pelosi said Thursday the COLA announcement is a reminder that “extreme MAGA Republicans are openly plotting new schemes to slash seniors’ benefits and raise their costs – including by threatening to cause an economic catastrophe by holding the debt limit hostage for their toxic agenda.”
Earlier this year, Sen. Rick Scott, R-Fla., issued a detailed plan that would require Congress to come up with a proposal to adequately fund Social Security and Medicare or potentially phase them out.
Senate Minority Leader Mitch McConnell, R-Ky., publicly rebuked the plan and Biden has used Scott’s proposal as a political bludgeon against Republicans before the midterm elections.
“If Republicans in Congress have their way, seniors will pay more for prescription drugs and their Social Security benefits will never be secure,” White House press secretary Karine Jean-Pierre said.