Social Security Benefits Could Get Their Biggest Boost in 40 Years.

[Graybeard]

Now a report from The Senior Citizens League predicts another bump is coming in 2023 that could raise benefits by 8.6%, the biggest increase since 1981.

Impacting roughly 70 million Americans, this year's increase raised the average benefit for a retired worker to $1,658 per month, according to the Social Security Administration.

If the prediction by TSCL, which advocates for older Americans, is accurate, beneficiaries could see another increase of about $143 a month in 2023, bringing their check to approximately $1,800.

https://www.cnet.com/personal-finance/social-security-could-get-its-biggest-boost-in-40-years-heres-how-much-you-might-get/

Seems kind of early to be predicting this but I thought it might be of interest.

 

[azxracer]

We're more than half way thru the calculation period (3rd Quarter of 2021 -- 3rd Quarter of 2022) and the inflation trend is not moderating much, if at all.

 

[TheWizard]

Ok, but will the increase be enough to fill up my F-150's 36 gallon tank at $6 per gallon for regular?

 

[HarryHawk]

It's probably trivial and easy enough to figure out, but I'm sleepy (and dopey) since it's almost bedtime.

Wondering if the inflation adjustment effects the payback period between taking early vs. waiting until 70. With high inflation, in one case I'm getting 8.5% of $4000 vs 8.5% of $2000 (for sake of easy discussion). Of course that interest then compounds, so does "the wait until 70" pull ahead over time compared to "take it early"?

 

[TheWizard]

It's probably trivial and easy enough to figure out, but I'm sleepy (and dopey) since it's almost bedtime.

Wondering if the inflation adjustment effects the payback period between taking early vs. waiting until 70. With high inflation, in one case I'm getting 8.5% of $4000 vs 8.5% of $2000 (for sake of easy discussion). Of course that interest then compounds, so does "the wait until 70" pull ahead over time compared to "take it early"?

The percentage increase due to inflation applies to your current benefit amount, no matter when it was taken...

 

[Chuckanut]

The percentage increase is compounded. So over 15-20 years it can really add up.
IMHO, if you can do it, taking SS at 70 is a great way to insure against portfolio failure and/or excess longevity.

 

[copyright1997reloaded]

Ok, but will the increase be enough to fill up my F-150's 36 gallon tank at $6 per gallon for regular?

I recently got a "truckette", a Ford Maverick Hybrid. I've been averaging 42 MPG so far.

As a result, my F150 isn't being used as much.

 

[daylatedollarshort]

https://www.cnet.com/personal-finan...ost-in-40-years-heres-how-much-you-might-get/

Seems kind of early to be predicting this but I thought it might be of interest.

It is always fun looking forward to more money. I have my expense optimization lists made out now with ideas to try to lower our personal inflation rate this year. If we can get more from AA next year and have lower expenses, that works for me.

 

[camfused]

Will an increase like this mean that the SS haircut happens even sooner, and/or will be even larger?

 

[Katsmeow]

We're more than half way thru the calculation period (3rd Quarter of 2021 -- 3rd Quarter of 2022) and the inflation trend is not moderating much, if at all.

It will be based upon the third quarter of this year compared to the third quarter of last year. Potentially it could significantly decrease before then. I suspect it will decrease from what it is now but I imagine there will be a substantial increase for next year.

Will an increase like this mean that the SS haircut happens even sooner, and/or will be even larger?

You are making an assumption that there will be one. Is it possible? Sure. Do I think it is very likely? Unknown. There are many, many other options that would obviate such an action.

 

[HarryHawk]

The percentage increase is compounded. So over 15-20 years it can really add up.
IMHO, if you can do it, taking SS at 70 is a great way to insure against portfolio failure and/or excess longevity.

That was my thought as well. Not sure if it would make a big difference, but there is detailed analysis on this topic and it never seems to include any inflation scenarios.

 

[DrRoy]

IMHO, if you can do it, taking SS at 70 is a great way to insure against portfolio failure and/or excess longevity.

I am currently in the window, and thinking the same thing.

 

[jollystomper]

The related question is, what will the Medicare Part B increase be, and how much will it impact the SS increase?

Remember, for 2022 SS went up 5.9%... but Medicare Part B went up 14.5%. Just remember, if on Medicare, to look at the net.

 

[joesxm3]

Do/can they reduce the payment amount if inflation goes down?

 

[Dash man]

The related question is, what will the Medicare Part B increase be, and how much will it impact the SS increase?

Remember, for 2022 SS went up 5.9%... but Medicare Part B went up 14.5%. Just remember, if on Medicare, to look at the net.

Remember the large increase was because of the expectation that new Alzheimer’s drug would be approved by Medicare. Since it’s not fully approved, the next increase will hopefully not be as high. Call me an optimist.

 

[TheWizard]

Do/can they reduce the payment amount if inflation goes down?

No.
But they keep track of CPI-W across the ups and infrequent downs.
So the next increase will be offset by the CPI-W recovery, if that makes sense...

 

[Gumby]

It will be based upon the third quarter of this year compared to the third quarter of last year. Potentially it could significantly decrease before then. I suspect it will decrease from what it is now but I imagine there will be a substantial increase for next year.....

If we had zero inflation between now and the end of September, the Social Security COLA increase for 2023 would be 6.0%.

CPI-W average 3Q 2021 = 268.421

CPI-W as of April 2022 = 284.575

SS increase for 2023 = CPI-W average 3Q 2022/CPI-W average 3Q 2021

Assuming zero increase from May through September 2022=> 284.575/268.421 = 1.06

Theoretically, we could see deflation between now and the end of September, but that seems unlikely, so I think it is safe to say the COLA increase will be at least 6%. If inflation averaged 5% (year over year) from now to the end of September, the COLA would be 7.8%


https://www.ssa.gov/pubs/EN-05-10526.pdf

 

[Chuckanut]

If we had zero inflation between now and the end of September, the Social Security COLA increase for 2023 would be 6.0%.

I would gladly give up any and all of a SS increase to see low or zero percent inflation.

One more point on when to take SS. If you start at 62, after a period of time you are locked in to that decision. If you delay taking SS, you can always turn it on later, at 63, or 65 and 4 months, or 67 and two months. It's not a binary choice. There are at least 95 more points in the future where you can change your mind and start taking SS.

 

[qwerty3656]

If you're not yet 62, this has no impact on your expected benefit, right?

 

[TheWizard]

If you're not yet 62, this has no impact on your expected benefit, right?

Wrong.
Your expected benefits will increase by similar amounts...

 

[eytonxav]

These increases will only make the time to haircut shorter. Of course the gummit will do nothing until that is inevitable.

 

[USGrant1962]

These increases will only make the time to haircut shorter. ...

Maybe, maybe not. SS revenue goes up by CPI-W inflation too, and the SS CPI increase lags (basically it goes up by last year's inflation).

But from the 2021 Trustees report, they used 1.8% to 3.0% inflation in various cases - so things are diverging from the last full analysis. So we'll have to wait and see what the actuaries say.

https://www.ssa.gov/OACT/TR/2021/tr2021.pdf

 

[Sunset]

These increases will only make the time to haircut shorter. Of course the gummit will do nothing until that is inevitable.

This will be tempered by the wage increases that have happened and will happen due to workers wanting more to cover inflation.

 

[Turbo29]

You are making an assumption that there will be one. Is it possible? Sure. Do I think it is very likely? Unknown. There are many, many other options that would obviate such an action.

It's not so much that they are making an assumption as it is a requirement of current law; the SS "haircut" is the default. When the trust fund is exhausted SS payouts will be limited to current SS tax receipts.

I would consider thinking that the current law will be changed before this happens to be more of an assumption.

 

[MissMolly]

Wrong.
Your expected benefits will increase by similar amounts...

This is incorrect. The COLAs do not apply until the year you turn 62.