In order to keep up with inflation, the Social Security Administration recalculates Social Security benefits each year. The cost of living allowance is calculated using the third-quarter Consumer Price Index for all urban wage earners and clerks. It is announced in October and takes effect in January, with the December benefit, which is paid out in February.
It was declared in October 2021, when inflation was lower than it had been so far in 2022, that the 5.9 percent hike for 2022 would be implemented. CPI-W has risen by 9.8 percent over the past 12 months, according to official figures. While next year’s COLA won’t be determined until after the third quarter concludes on September 30, the Senior Citizens League predicts an inflation adjustment of 10.5% for 2023 based on trends seen so far in 2022.
Using the average monthly payout of $1,668 per month would add an additional $175+ to the wallets of retirees. COLA might rise to 11.4 percent if inflation is higher than forecast. 9.8% COLA is still a lot even if it stays the same or cools down a little. However, for many seniors, this may not be as good news as it seems. According to Leedaily, there are a few downsides to such a high COLA hike.
Also, look at
- TSMC is China’s Ace in the Hole Against the United States and Taiwan
- Update on Social Security Benefits for 2023, with a Huge COLA Increase Anticipated
Seniors May Be Pushed Into Higher Tax Brackets by High Cola Increases
Retirement income, such as interest, dividends, investment gains, and other forms of earned income, may be subject to taxation for the first time for those who receive Social Security benefits. When married couples file jointly and earn more than $44,000 a year, the Social Security Administration estimates that up to 85% of their benefits may be subject to taxation.
Income between $32,000 and $44,000 may be taxed on up to 50% of the benefits received by anyone earning this amount or more; People earning between $25,000 and $34,000 may be subject to a tax of up to 50% of their benefits. Social Security benefits received by anyone earning more than $34,000 per year may be subject to taxation at a rate of up to 85%.
Those who were close to any of these thresholds could be pushed over the edge by a significant COLA hike. Seniors who get the COLA increase will not see an increase in their take-home pay as a result of the increase in their tax obligations.
Forecasted increase in Social Security benefits is now 10.5% for 2023 and Medicare Part D at 8.5%. So this COLA will create a $130B hole in SS in 2023 which will get progressively (pun more than intended) worse as more people retire. Inflation is the gift that keeps on giving
— Vanessa Atalanta Wisedog (@Wisedog4) August 7, 2022
Even Double-digit Increases Won’t Beat Inflation
If inflation continues at its current rate, the annual rise in COLA may not be sufficient to assist seniors to pay their costs. According to sources, it would only aid the elderly in their struggle to keep up with escalating costs of food and other necessities.
An Accurate Measure of Senior Living Costs May Not Be Accurately Reflected by the CPI-W. Aside from other economic indicators, the CPI-W can reveal whether prices are rising or falling. It’s not the ideal way to calculate the costs of caring for an elderly parent. Workers who earn hourly wages or clerical positions are solely included in the CPI-estimate W’s of inflation, which includes gas prices.
…wage didn’t see an increase, creating a gap between what people can make in fast food vs healthcare. 2022-2023 state budget included COLA for DSPs, but did not include the Fair Pay For Homecare bill. Activists wanted to see homecare minimum wage…
— Emyle Watkins ♿️ (@EmyleWatkins) August 6, 2022
Retirees don’t have to commute to work, therefore the figure doesn’t mean as much to them as it does to working people. In contrast, according to some sources, senior citizens spend twice as much on healthcare than younger individuals.
New Bill May Change COLA Calculation
Hawaii Senator Mazie Hirono has reintroduced the Protecting and Preserving Social Security Act to make up for these shortfalls. Also included are methods for calculating COLAs that more properly reflect the pricing of commodities that matter most to seniors, such as food, housing, and medical care.
As a result, retirees may be forced to put up with a record-high increase in taxes and reduced retirement income for the time being, despite their best efforts. Stay tuned with us only on Lee Daily
