Social Security benefits to rise by 8.7% in 2023, the biggest boost in decades
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 higher 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 Thursday by the Social Security Administration.
While Social Security recipients welcomed the benefit increase, many said it wasn’t enough to cover the impact of inflation.
It’s “not much help,” said 85-year-old Shirley Parker, who lives on Chicago’s South Side.
Home maintenance costs and high grocery prices are cutting deeply into her budget. “Food is ridiculous. I come out with a bag full of groceries — $50 — don’t have about 10 items,” she said.
The Social Security adjustment was established to help seniors and other recipients manage the higher cost of food, fuel and other goods and services. How well it does that depends on what happens with inflation.
Inflation in the United States accelerated in September, with the cost of housing and other necessities intensifying pressure on households.
A separate government report Thursday showed inflation newly accelerating. The Consumer Price Index rose 0.4% in September, following a rise of just 0.1% in August, and is up 8.2% over the last 12 months. Jobless claims for unemployment benefits rose for the week.
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 benefits will be coupled with a 3% drop in Medicare Part B premiums, meaning that many retirees are receiving even more good news.
“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,” Social Security Administration Acting Commissioner Kilolo Kijakazi said.
It’s not just retirees who will get what’s expected to be the largest cost-of-living adjustment in Social Security benefits in 40 years.
Colby Nelson, a spokesman for AARP, said the benefits increase “will provide much-needed relief to millions of Americans.” He called the annual cost-of-living increase “more crucial than ever as high inflation remains a problem for older Americans.”
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 November midterm elections, and at a time when Democrats and Republicans are sparring about high prices now and how best to shore up Social Security 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.”
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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, Ill., says his budget is “real tight” and the increase in his Social Security disability benefits could give him some wiggle room to cover the household expenses he’s 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 U.S. 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 $160,200.
Improving Social Security is a matter of political will, not affordability.
The financing setup dates to the 1930s and was 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.
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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 received 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.
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 ahead of 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 in a statement Wednesday.
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