Social security recipients to get 8.7% boost in benefits – highest in 40 years
Historic increase means average recipient will receive over $140 extra a month along with a 3% drop in Medicare Part B premiums
Millions of social security recipients will get an 8.7% boost in their benefits in 2023.
That’s a historic increase and welcome news for American retirees and others but it is tempered by the fact that it is fueled by record high inflation that has raised the cost of everyday living.
The cost-of living adjustment means the average recipient will receive more than $140 extra a month beginning in January, according to estimates released on Thursday by the Social Security Administration.
The boost in benefits will be coupled with a 3% drop in Medicare Part B premiums, meaning retirees will get the full impact of the jump in social security benefits.
The Social Security Administration’s acting commissioner, Kilolo Kijakazi, said combined with Medicare premiums going down in 2023, the social security benefit increase “will give seniors more peace of mind and breathing room”.
“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,” she said.
The increase is the largest in 40 years, is fueled by record high inflation and is meant to help cover the higher cost of food, fuel and other goods and services. How well it does that depends on inflation next year.
The 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.
Joe Biden has pledged to protect both social security and Medicare. “I’ll make them stronger,” the president 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.
Willie Clark, 65, of Waukegan, Illinois, says his budget is “real tight” and the increase in his social security disability benefits could give him some breathing room to cover the cost of the household expenses he has been holding off on.
Still, he doubts how much of the extra money will end up in his pocket. His rent in an apartment building subsidized by the US Department of Housing and Urban Development is based on his income, so he expects that will rise, too.
Social security is financed by payroll taxes collected from workers and their employers. Each pays 6.2% on wages up to a cap, which is adjusted each year for inflation. The maximum amount of earnings subject to social security payroll taxes for 2023 is $155,100.
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 is facing a severe shortfall in coming years.