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COLA social security: Seniors will soon have a big increase in cost of living benefits

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Seniors and other Social Security beneficiaries will start receiving a heavier monthly benefit next month due to an 8.7% annual cost-of-living adjustment designed to help them cope with high inflation.

The increase, the largest in more than 40 years, will increase retirees’ monthly payments by more than $140 to an estimated average of $1,827 in 2023.

The adjustment is the highest most current recipients have ever seen because it’s based on an August-October inflation metric that was also around 40-year highs.. Inflation has cooled somewhat since then, although prices remain high.

“I’m sure everyone is waiting anxiously because prices are still high,” said Mary Johnson, a Social Security and Medicare policy analyst for the Senior Citizens League, an advocacy group. “Just buying food to feed people during the holidays will be quite a challenge.”

Around 70 million people will receive the increase, which follows a 5.9% readjustment for 2022.

Many seniors rely heavily on Social Security. About 42% of older women and 37% of older men depend on monthly payments for at least half of their income, according to the Social Security Administration.

The exact time when the boost payment arrives depends on the age and date of birth of the recipients. Those who received Social Security before May 1997 receive the monthly benefit on the 3rd of each month. For the most recent retirees, those born on the 1st to 10th of the month receive it on the second Wednesday, while those born on the 11th to 20th and 21st to 31st of the month receive it on the third and fourth Wednesdays, respectively.

While recipients received a sizable adjustment for this year, inflation has eroded momentum.

The increase missed real inflation by an average of more than $42 — or 46% — each month or about $508 for the year, Johnson said.

Many retirees were forced to draw on their savings or public assistance. One-third of seniors reported signing up for food stamps or visiting a food pantry in the last 12 months, up from 22% in 2020, according to recent surveys by the League of Senior Citizens. Additionally, 17% requested assistance with heating costs, up from 10% in 2020.

This is not a new problem. For years, the benefits have not accompanied the increase in the cost of living, even with the annual readjustments.

As of March, inflation has caused Social Security payments to lose 40% of their purchasing power since 2000, according to a study released earlier this year by the league. Monthly benefits would have to increase by $540 to maintain the same purchasing power level as in 2000.

Seniors will also see their Medicare Part B premiums drop in 2023, the first time in more than a decade that the tab will be lower than the previous year, the Centers for Medicare and Medicaid Services announced in the fall. It’s just the fourth time premiums have fallen since Medicare was created in 1965.

Standard monthly premiums will be $164.90 in 2023, down $5.20 from 2022.

The reduction comes after a large increase in 2022 premiums, which took the standard monthly premium to $170.10, up from $148.50 in 2021. One of the main drivers of the 2022 increase was a projected jump in spending due to a expensive new drug for Alzheimer’s disease, Aduhelm. However, since then, the manufacturer of Aduhelm has lowered the price and the Centers for Medicare and Medicaid Services has limited the drug’s coverage.

In addition, expenditures were lower than projected on other Part B items and services, which resulted in much larger reserves in the Part B trust fund, allowing the agency to limit future premium increases.

The big annual adjustment could end up hurting some seniors, Johnson said.

For example, the resulting increase in income could push them over thresholds for certain government benefits, such as Medicare Extra Help, Medicaid, food stamps and rent assistance, leaving them eligible for less or no aid. Or they may have to pay more for their Medicare Part B premiums, which are adjusted for income.

Also, they may have to start paying taxes — or owe higher taxes — on their Social Security benefits if their income rises above a certain level.

In addition, the increase could leave Social Security finances on even shakier ground. The blended trust funds that pay benefits to retirees, survivors and the disabled will be exhausted by 2035 and will only be able to distribute about three-quarters of pledged payments unless Congress addresses the program’s long-term funding shortfall, according to the most recent trustees of Social Security. ‘ report.