Millions of retirees live on the fixed income provided by social security. With little outside savings, having Social Security make annual cost-of-living adjustments is essential, as it allows the purchasing power of the checks program recipients receive to remain reasonably constant even in the face of inflation. high.
In January, Social Security beneficiaries will see an increase in the amount of their monthly payments, as the COLA for 2023 goes into effect. Below, we’ll see how much most retirees can expect to get Social Security and whether it will be able to cover the higher costs they faced for much of 2022.
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What the typical American gets from Social Security
When you look at the average Social Security benefits over the years, you will notice that they are gradually increasing. This is due to several factors, including not only the COLA, but also the fact that the benefit formula changes every year to incorporate changes in employment history and other factors.
The problem, however, is that these increases cannot be expected to be consistent from year to year. As you will see below, there have been a few years over the past decade where the monthly check hike has been minimal at best. Still, in 2023, program participants can expect relatively large gains, with the average amount increasing by $170 from the start of 2022.
|
Year |
Average social security benefit for retired workers |
|---|---|
|
2013 |
$1,261 |
|
2014 |
$1,294 |
|
2015 |
$1,328 |
|
2016 |
$1,341 |
|
2017 |
$1,360 |
|
2018 |
$1,404 |
|
2019 |
$1,461 |
|
2020 |
$1,503 |
|
2021 |
$1,544 |
|
2022 |
$1,657 |
|
2023 |
$1,827 |
Data source: Social Security Administration.
The reason is quite simple. Most of the 10.3% increase in average from 2022 to 2023 comes from the 8.7% COLA that is expected to come into effect early next year. The rest of the increase is the result of continued increases in average earnings over time, which have the effect of gradually increasing benefit amounts for typical Americans.
Why the challenges facing seniors are far from over
As nice as it may be to have extra cash in your pocket, no one is really happy about increased Social Security benefits. This is because people had to pay the higher prices that led to that big COLA all year round in 2022, so the increase only helps seniors catch up on spending in the future. which they had to cover themselves until now.
The numbers confirm exactly what older people are facing right now. Using an experimental measure that focuses on what older Americans have to pay for a typical combination of goods and services, the Bureau of Labor Statistics said earlier this month that its CPI-E index increased by 7, 6% over the last 12 months. This is the highest annual earnings rate since the government agency began measuring this research-based measure in 1982.
A silver lining, however, is that most seniors will receive good news on the health insurance front. A rare drop in monthly premiums for Medicare Part B medical coverage should add a few extra dollars to monthly checks.
More pain to come
Even with bigger checks to help older Americans, many expect inflation to remain high through 2023, which could put additional pressure on seniors’ wallets. Any additional inflation between now and next year will not be factored into Social Security checks until 2024.
The fact that Social Security benefits increase over time is vital to the financial health of retirees. But rather than being a waste of money for the nation’s seniors, any increases are just helping them try to keep up with the inexorable impact of inflation on purchasing power.
https://www.ssa.gov/policy/docs/chartbooks/fast_facts/2021/fast_facts21.html
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