Retired and broke? Help is on the way
February 1, 2023 | View PDF
Social Security beneficiaries will soon receive a whopping 8.7 percent increase in monthly checks — welcome relief for retirees fighting the ravages of inflation. This is the largest cost-of-living adjustment (COLA) since 1981 and will add $146 to the average retired Social Security recipient’s monthly benefit, pushing it from about $1,681 to $1,827, says the Social Security Administration.
The agency began adjusting Social Security benefits for inflation in 1975 to ensure that the buying power of monthly checks did not evaporate as prices inevitably rose. The amount of the adjustment is based on the difference between the average consumer price index for urban wage earners and clerical workers (CPI-W) for the third quarter (July, August and September) from one year to the next. That’s economist talk for the rise in price of select goods and services tracked by the U.S. Bureau of Labor Statistics.
These larger Social Security checks will reach millions of older Americans who have seen their cash needs grow these past few years due to levels of inflation not seen in decades. The extra money can be a critical lifeline for those on fixed incomes.
How critical? Social Security is the largest source of retirement income for most Americans, AARP research shows. It provides nearly all income for 1 in 4 seniors. The guaranteed benefit that Social Security provides is essential to their livelihood.
People collecting Social Security Disability Insurance (SSDI) or Supplemental Security Income (SSI) — payments that Social Security administers for people largely unable to work — will also get the increase, as will veterans who receive disability benefits and retirement pay.
For many older adults, Social Security works in tandem with Medicare. Some years, an increase in the COLA is offset by higher Medicare costs, which come directly out of Social Security checks.
But older Americans received more welcome news this year when the Centers for Medicare and Medicaid Services announced a rare decrease in Medicare Part B premiums and deductibles. AARP had called for that rollback following a decline in the price and lower usage than expected for the new Alzheimer’s disease drug Aduhelm. A predicted surge in costs to cover Aduhelm accounted for about half of a large premium increase in 2022.
In addition to lower Part B premiums, parts of the Inflation Reduction Act go into effect next month. For those enrolled in Medicare Part D, most vaccines will be free and insulin copays will be capped at $35 per month.
Ninety percent of people age 50 and older who get Social Security retirement benefits, or will in the future, say they are worried their benefits may not keep up with inflation, an AARP survey found. That’s why AARP is urging Congress to work in a bipartisan way to protect and strengthen Social Security.
Millions of Americans work hard throughout their lives to earn their benefits. Social Security is a promise that must not be broken. We will continue to work with both parties to protect Social Security. The stakes are too high for anything less.
Jo Ann Jenkins is the CEO for AARP.