Social Securities Big Changes Coming
Social Security recipients could see more money in their monthly payments in 2023 due to the anticipated record-high cost-of-living adjustment (COLA). Moreover, seniors could receive an extra $2,400 a year if the Social Security Expansion Act of 2022 passes in the U.S. House and Senate.
Every year, the Social Security Administration (SSA) adjusts benefits to help Social Security keep up with inflation, which is the rising costs of goods and services over a certain period. The surging inflation in late 2021 resulted in more than 64 million Social Security beneficiaries receiving a 5.9 percent COLA for 2022.
Since inflation continues to surge in the United States, economists and senior advocacy groups expect the largest benefits increase in decades for 2023. The SSA plans to announce the COLA increase on Oct. 13, 2022.
SSA bases COLAs on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics. However, senior advocacy groups want to see COLAs based on the Consumer Price Index for the Elderly (CPI-E) instead of the CPI-W.
According to The Senior Citizens League (TSCL), one of the biggest problems with using the CPI-W to calculate the Social Security COLA is the fact that “it does not track the spending of retired households age 62 and up and gives greater weight to gasoline and transportation costs.”
“Across the board, retired and disabled Social Security recipients spend a bigger portion of their incomes on healthcare costs, housing, and food and less on gasoline,” TSCL said in a Sept. 14 press release. “Over the past 12 months, they rank food costs as their fastest growing expenditure, housing, and transportation in that order.”
Senior advocacy groups also criticize Social Security COLA calculations because it does not consider annual increases in the Medicare Part B premium. Medicare Part B covers physician services, outpatient hospitalization services, and certain other medical and health services that Medicare Part A does not cover.
The standard monthly premium for Medicare Part B in 2022 is $170.10, a $21.60 increase from $148.50 in 2021. The annual deductible for all Medicare Part B beneficiaries was $233 in 2022, an increase of $30 from the annual deductible of $203 in 2021. The Medicare Part B premium, deductible, and coinsurance rates are determined according to the Social Security Act.
For many seniors, monthly Social Security benefits are their primary—if not only—the source of income. A 2022 Gallup survey found that Social Security was either a major or minor source of income for 90 percent of current retirees.
Around one in every seven seniors rely on Social Security for more than 90 percent of their income, and the average Social Security benefit is only $1,540 a month, according to a fact sheet from the Social Security Expansion Act. Moreover, about half of Americans 55 and older have no retirement savings.
Representatives for TSCL, one of the nation’s largest nonpartisan senior groups, said they have heard from seniors who are struggling because of “seriously insufficient” COLAs. TSCL initially forecasted a 9.6 percent Social Security COLA for 2023. However, based on the CPI-W data through August, the SCL dropped its COLA projection to 8.7 percent.
“A COLA of 8.7 percent is extremely rare and would be the highest ever received by most Social Security beneficiaries alive today,” said Mary Johnson, TSCL’s Social Security and Medicare policy analyst. “There were only three other times since the start of automatic adjustments that it was higher (1979-1981).”
Pending Legislation To Protect Social Security
In June, U.S. Rep. Peter DeFazio (D-Ore.) and U.S. Sen. Bernie Sanders (I-Vt.) introduced the Social Security Expansion Act of 2022, a bill designed to strengthen and expand Social Security for the next 75 years.
With the cost of living at an all-time high, Rep. DeFazio said that Social Security has never been more important. Similarly, Sen. Bernie Sanders believes Social Security must be expanded “so that every senior citizen in America can retire with the dignity they deserve and every person with a disability can live with the security they need.”
The joint legislation calls for:
- A $200 increase in monthly benefits, resulting in an extra $2,400 yearly for current and existing Social Security recipients.
- Increasing annual COLAs based on the spending patterns for seniors by adopting the Consumer Price Index for the Elderly instead of the Consumer Price Index for Urban Wage Earners and Clerical Workers.
- Extending the solvency of Social Security for 75 years by applying Social Security payroll tax to all income above $250,000. Currently, income above $147,000 is not subject to the Social Security tax.
- Requiring the wealthy to pay Social Security taxes. Currently, employees have 12.4 percent taken out of their paycheck for Social Security. Half of that percentage is paid by the employee, and the other half by the employer. The bill would require the wealthy to pay 12.4 percent of their investment and business income that is not already covered by payroll taxes.
- Improving the Special Minimum Benefit for Social Security recipients. The Special Minimum Benefit is an alternative primary insurance amount intended to increase benefits for long-term low-wage earners. The bill proposes to increase this benefit and index the benefit level so that it is equal to 125 percent of the poverty line or about $17,000 for a single worker who has worked their full career.
- Restoring student benefits up to age 22 for children of disabled or deceased workers if the child is a full-time student in a college or vocational school. This legislation restores student benefits to help educate children of deceased or disabled parents (these benefits were eliminated in 1983).
- Combining the Disability Insurance Trust Fund with the Old Age and Survivors Trust Fund. The Disability Insurance Trust Fund pays monthly benefits to disabled-worker beneficiaries and their spouses and children. The Old Age and Survivors Trust Fund pay out Social Security benefits.
More than 40 groups have endorsed the bill, including TSCL and National Committee to Preserve Social Security and Medicare.
“It is well past time for Social Security to be updated to meet the needs of today’s workers and beneficiaries,” Max Richtman, President and CEO of the National Committee to Preserve Social Security and Medicare, said in a press release. “Enactment of the Social Security Expansion Act would provide positive proof that Congress takes Social Security seriously and can work together to strengthen and improve this program that is so important to Americans’ economic wellbeing—without privatization or benefit cuts.”