Recipients of Social Security benefits are about to receive an increase in their payments that may represent the largest cost of living jump in decades. Estimates have ranged from 9.6% to 8.7%, based on cost of living data. Nearly 70 million Americans will be affected.
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The Social Security Administration will wait to make its official announcement on October 13. At that point, official government data on inflation will have been set based in part on the September consumer price index (CPI) figures. These figures have been above 8% recently, and June hit 9.1% year over year. Core inflation is worse. The total CPI number has been held down by a drop in gasoline prices.
The New York Times points out that Medicare payments often go up less than the cost of living. This may undermine the true increase in Social Security payments.
Two issues are driven results of the increase plan. The first is that the higher payout will further stress the financial health of Social Security funds. The Social Security Trustees recently forecast the funds would reach a point in 2034 when it will not be able to pay out full benefits. CNBC explained “In other words, Social Security will exist after 2034, but retirees will only receive 78% of their full benefit starting then.” Congress would need to take action to prevent this. In turn, the decision almost certainly would increase the federal government’s annual deficit.
The other worry about Social Security is that payments as they exist today are much too low to support anything other than basic monthly costs, particularly for people who are retired. The average retirement benefit is just below $1,700 a month. That means the annual payment totals a figure below the poverty line. Recipients would need substantial income from other sources to barely live a middle-class life.
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