Silver City: Happy 2023 with Historic Increase in Social Security
By November 28, 2022 0 683•
No one quite believed the rumors and news reports that started coming out in October of a possible historic increase in the cost of living adjustment that might be added to the annual Social Security payment for some 66 million over 60-year-olds in the United States every month. But on Friday, the day after Thanksgiving, the official news started posting in Social Security beneficiaries’ emails and postboxes. Social Security benefits will increase permanently by 8.7 percent starting January 2023.
“That’s a big raise for more than 52 million retired Americans, and another 18 million who are survivors of covered workers or recipients of disability benefits or Supplemental Security Income,” writes Mark Miller, the New York Times columnist on retirement, who is a well known author and speaker on redefining retirement in the United States. “With such a big headline COLA figure, it’s tempting to think that seniors are living on easy street. But keep in mind that the COLA does no more than keep seniors even with inflation. The reality is that about half of seniors struggle to meet their basic living expenses.”
In 2022, an average of 66 million Americans per month will receive a Social Security benefit, totaling over one trillion dollars in benefits paid during the year. Social Security is the major source of income for most of the elderly. Without Social Security benefits, about four in 10 adults aged 65 and older would have incomes below the poverty line, all else being equal, according to official estimates based on the 2021 Current Population Survey.
Social Security is especially important for women, because they tend to earn less than men, take more time out of the paid workforce, live longer, accumulate less savings, and receive smaller pensions. Women represent more than half of Social Security beneficiaries in their 60s and 7 in 10 beneficiaries in their 90s. In addition, women make up 96 percent of Social Security survivor beneficiaries.
Social Security benefits are based on the earnings on which people pay Social Security payroll taxes. The higher their earnings (up to a maximum taxable amount of $160,300 – upped from $147,000 in 2022), the higher their benefit. Social Security benefits are progressive. Once someone starts receiving Social Security, their benefits increase to keep pace with inflation, helping to ensure that people do not fall into poverty as they age. (In contrast, most private pensions, 401Ks, annuities and other saving plans are not adjusted (or are only partly adjusted) for inflation.
Signed into law by President Franklin Roosevelt in 1935, Social Security is the major factor a large proportion of Americans no longer live in poverty as they grow old. Increases in benefits were managed through legislation until 1975 when under President Gerald Ford, the COLA was established. It started at 8 percent. In 1980 and 1981 under President Jimmy Carter, COLA increased to 9.9 percent then 14.3 percent – the historic high. By 1986, the annual COLA under President Ronald Reagan had sunk to 1.3 percent. But that wasn’t the lowest. Starting in 2009, under President Barack Obama, the COLA was 0 percent for three years. In 2020, it was 1.3 percent under President Donald Trump. It is up again now due to high inflation the past year. Obviously, economic conditions control the percentage of COLA annual increases or decreases.
But most recipients do not receive the full gross dollar amount of Social Security total in their monthly paychecks. That’s because most also receive Medicare insurance and the monthly general hospital and doctors visits monthly charges – parts A and B – are taken out automatically from most everyone’s Social Security monthly payment. In 2023, recipients are getting an unusual break, however. The amount taken from their Social Security for Part B will decrease by about $7.
According to Miller, the decline is the result of the unusual circumstances surrounding Aduhelm, the controversial and very expensive drug for treating Alzheimer’s disease. The Food and Drug Administration approved Aduhelm in June 2021 despite objections from the agency’s own scientific advisory panel. The drug was initially to cost $56,000 per patient annually — a figure that the drug’s maker, Biogen, later reduced to $28,800. Since Aduhelm is administered in outpatient settings, the cost would be borne by Part B, not Part D, the prescription drug plan. According to Tricia Neuman, executive director of the Medicare policy program at the Kaiser Family Foundation “Medicare is reducing premiums for 2023 mainly to account for lower than expected spending on Aduhelm.”
This story was supported by a Journalists in Aging Fellowship from the Gerontological Society of America, the Journalists Network on Generations and the Silver Century Foundation.