Social Security recipients expected to get big benefit boost
WASHINGTON — Millions of Social Security recipients will learn soon just how high a boost they’ll get in their benefits next year.
The increase to be announced Thursday, expected to be the largest in 40 years, is fueled by record high inflation and is meant to help cover the higher cost of food, fuel and other goods and services. It will be affected by inflation next year.
The increase in benefits will be accompanied by a 3% drop of Medicare Part B premiums. This will ensure that retirees get the full benefit of the increase in Social Security benefits.
The announcement comes just weeks before the midterm elections, and at a time when Democrats and Republicans are sparring about high prices now and how best to shore up the program financially in the future.
President Joe Biden vowed to protect Social Security and Medicare. He said last month that he would make them stronger. “And I’ll lower your cost to be able to keep them.”
White House press secretary Karine Jean-Pierre said in a statement Wednesday that the combination of a Social Security benefit boost and a decline in Medicare premiums will give seniors a chance to get ahead of inflation. She stated that she would put more money into their pockets and give them a little more breathing room.
About 70 million people — including retirees, the disabled and children — receive Social Security benefits. This will be the largest increase in benefits that the baby boomers born between 1946 or 1964, will ever see.
Willie Clark, 65, of Waukegan, Illinois, says his budget is “real tight” and the increase in his Social Security disability benefits could give him some breathing room to cover the cost of the household expenses he’s been holding off on. He isn’t sure how much of the extra cash will end up in his pockets. His income is the basis of his rent in an apartment building that is subsidized by U.S. Department of Housing and Urban Development. He expects that this will also increase.
Social Security funding comes from payroll taxes that are collected from workers and their employer. Each worker pays 6.2% on wages up until a cap. This cap is adjusted annually for inflation. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $155,100.
The financing setup dates to the 1930s, 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.
The higher payout for next year, without an increase in Social Security contributions could add to the pressure on a system already facing severe shortfalls in the coming years.
The annual report of the Social Security and Medicare trustees was released in June. It stated that the trust fund for the program will not be able to pay all benefits starting 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.
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 got bipartisan support, with 56% of Democrats and 58% of Republicans calling it a top priority.
There have been a few proposals to reform Social Security, but none has been implemented by a partisan Congress.
Earlier in the year, Senator Rick Scott, R.-Fla., presented a detailed plan that required Congress to develop a proposal to adequately finance Social Security and Medicare, or to phase them out.
Senate Majority Leader Mitch McConnell (R-Ky.) publicly rejected the plan. Biden has used Scott’s proposal as a political bludgeon to Republicans ahead of the midterm elections.
” If Republicans in Congress get their way, seniors would have to pay more for prescription drugs and their Social Security will never be secured,” Jean-Pierre stated.
Claire Savage in Chicago contributed to this report.
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