Despite what many people believe, Social Security is a fluid benefits program, changing from year to year. Yahoo! Finance found that there are a number of variables that can impact Social Security and how much money beneficiaries receive. It’s important for everyone to understand how it works, so we’ve compiled a little summer school lesson. Here’s a quick rundown on some of the key points:
Whether inflation continues to increase this summer could affect how much money Social Security recipients receive next year. The Social Security Administration (SSA) looks at the rate of inflation from July through September when calculating its annual cost-of-living adjustment (COLA). This year’s COLA was set at 5.9 percent, but many analysts predict 2023’s COLA could be 8.6 percent or even higher because of inflation.
That’s promising news for seniors struggling to get by on a fixed income from Social Security. But the Seniors Trust believes a better option would be to use the Consumer Price Index for the Elderly (CPI-E) when calculating Social Security COLAs instead of the Consumer Price Index for Urban Wage Earners (CPI-W) used currently. That’s because the CPI-E takes the unique spending habits of seniors into account — particularly regarding the cost of healthcare — and offers a more realistic COLA for retirees.
Trust Fund Future
Another thing we need to keep an eye on is the Social Security Trust Fund balance. The SSA had previously predicted that its Trust Fund could reach a deficit as early as 2033. It’s important to point out that Social Security is funded by payroll taxes paid by current workers, so Social Security technically cannot “run out of money” as long as people are still working. However, if it becomes insolvent, then benefits could be greatly reduced. No one wants to see that happen!
Fortunately, as CNBC reported, the SSA announced in June that it projects its Trust Fund will last until 2034, extending full benefits by another year. The Seniors Trust believes that’s not good enough.
We want Congress to enact the Social Security Expansion Act. It will extend the solvency of the Social Security Trust Fund by 75 years, through 2096, by requiring the wealthiest Americans pay their fair share into the fund. This legislation would lift the income tax cap and subject all income above $250,000 to the Social Security Payroll tax and help fill trust fund coffers.
This critical bill would also increase monthly Social Security benefits by about $200, which is welcome news as seniors on fixed incomes struggle with higher prices for everything from groceries and gas to prescription drugs and housing.