Social Security beneficiaries will see a 5.9% increase in their monthly checks starting January 2022, but experts warn the increase may not counter the rate of inflation.
Social security benefits will increase 5.9% this year (2022), making it the biggest increase in benefits since 1982. However, experts are concerned that the increase won’t be enough to combat the rising cost of goods and living.
Social Security is a government system that provides monetary assistance to those with little or no income or provides benefits to retirees and those unemployed due to a disability.
A QUICK HISTORY:
The Social Security Act was signed into law by President Roosevelt in August of 1935 as part of the New Deal. It was created to “promote the economic security of the nation’s people.”
The program is designed to pay retired workers 65+ a continuing income.
In 1939, survivors’ insurance was added to the program to provide benefits to families of deceased workers.
Then in 1956, disability insurance was added to provide benefits to disabled workers and their families.
In 1965, Medicare benefits were added to provide beneficiaries with health insurance.
Finally, in 1972, a need-based program funded by the US Treasury General Fund was created, known as Supplemental Security Income, to provide payments to those 65+ or disabled with limited or no income or resources.
WHO GETS SS?
1 in 3 Americans are disabled, dependents, or survivors of deceased workers.
There are currently over 63 million beneficiaries for Social Security. 47+ million are retired workers or dependents. 10+ million are disabled workers and their dependents. And ~6 million are survivors of deceased workers.
HOW DOES SS CHANGE?
Social Security adjustments, or Cost of Living Adjustments (COLA), are adjusted yearly to reflect the rising cost of goods such as food and gasoline.
Last year, Social Security rose 1.3% while inflation was at its highest in four decades.
Inflation has gone up 6.8% in the last 12 months (since December of 2021), and this year Social Security benefits will rise 5.9% leaving beneficiaries with less income after expenses.
The average beneficiary will receive an extra $93 per month, raising the typical check to $1,658 per month starting January.
THE IMPACT OF INFLATION:
On the contrary, costs for Medicare Part B plans are rising 14.5% this year to an average of $170.10 per month.
Gas prices are up 60% compared to a year ago, and costs for food products have risen an average of 6% over the last year.
RELYING ON SS AND ADVICE FROM AN EXPERT:
Social Security is designed to act as supplemental income, replacing 40% of an average American retiree’s income. However, 40% of social security beneficiaries rely on Social Security payments as their sole source of income.
Comparably dramatic increases in Social Security (5% increases and more) are historically followed by years of minimal increases in benefits.
Laurence Kotlikoff, an economics professor at Boston University, says the biggest Social Security mistake people make is claiming benefits before they turn 70 – the age at which monthly payments hit their maximum.
Claiming benefits early reduces your annual payments by ~7%. However, only 6% of beneficiaries wait until they are 70 and claim early benefits (the earliest you can claim social security benefits based on age is 62 years old).
As inflation raises the cost of living in the country, Social Security beneficiaries relying solely on their benefits will face more economic insecurity in the years to come.