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

[MissMolly]

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

Correct. COLAs do not apply until the year you turn 62.

 

[joesxm3]

But if I am 65 planning to wait until 70 I will be ok right?

 

[MissMolly]

But if I am 65 planning to wait until 70 I will be ok right?

If by being OK means the COLAs will apply to you, then yes, you will be OK

 

[JDARNELL]

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.

I have one on order so hoping to get it in the fall

 

[friar1610]

For those who like to track this regularly, the Military Officers Association of America (MOAA) maintains a “COLA Watch” page on its web site. It tracks the monthly changes in inflation and has links to relevant articles and news. (Military retirements pay and SS get increases at the same rate.) if you are interested in following this regularly it may be a good link to bookmark.

https://www.moaa.org/Content/Take-Action/COLA-Watch

 

[Gumby]

Correct. COLAs do not apply until the year you turn 62.

The way that inflation affects your eventual benefits (if you are below 60) is that it increases the Primary Insurance Amount (PIA), which is the benefit you will receive at your normal retirement age. PIA is calculated based on average indexed monthly earnings (AIME). The CPI-W used for COLA usually roughly tracks the average wage index used to adjust your past monthly earnings for the AIME calculation, so it will increase your PIA.


https://www.ssa.gov/oact/cola/awifactors.html

 

[Chuckanut]

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

+1

IIRC, the maximum SS benefit that is not taxable is NOT indexed to inflation. And higher wages mean more SS tax paid in. We will see how this shakes out. A good BEAR market might also delay people taking SS at 62 as they continue to work. (Yes, I know that supposedly, that should not make a difference.) Time will tell.

 

[USGrant1962]

+1

IIRC, the maximum SS benefit that is not taxable is NOT indexed to inflation. So, more people will be above that, paying in more taxes.

True. And that money goes into the Trust Fund. There are a lot of moving parts wrt the calculated shortfall.

 

[Katsmeow]

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.

I did not make that assumption. I said it is unknown how the shortfall in the trust funds would be handled. Yes, it is indeed possible that the government does literally nothing over the next several years and lets the trust fund be completely depleted and then just cuts people's benefits to deal with that.

I never said it couldn't happen. But, no, I don't think it is the only possible outcome. Social Security law has remain unchanged over the decades. It has been shored up in the past. I personally think it is likely that that will happen in the future. Could there be some benefit cuts? Sure. Do I think the scenario of do nothing and simply allow uniform cuts of 24% is particularly likely? No. I think it is far more likely that this is a problem that will be solved. They could do smaller cuts to everyone. They could cut benefits at the top end. They could move eligibility dates out farther. They could increase payroll taxes. They could tax all income rather than have a cap on it. And, so on. I don't know how it will all shake out. I make no assumption. But, I do think there are many ways to deal with the problem other than doing nothing.

 

[copyright1997reloaded]

I'm in the camp that it can get pretty ugly.

I think there is a smoldering but building resentment of the younger generations toward the baby boomers. They are seeing the country deteriorate across a spectrum of areas and see a life in front of them that is considerably worse than their parents. A country that has enormous debt, a country where many of them are being priced out of being owners (e.g. housing), where they just can't seem to get ahead. I'm not here to argue that perception is universal (it certainly isn't), nor absolutely accurate...but I do believe it is a growing perception and feeling.

I believe that is why some of them have "dropped out" and so many places are finding it difficult to hire. WHY work, what's the point?

So, it might be interesting when come January and beyond when "boomers" get their 8 or 9 or 10 or more % benefit uplift when many of the younger have minimum wage jobs (or even worse if a recession comes no job). When they see the reigns of power controlled by boomers still hanging on.

 

[gauss]

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

Maybe we are getting stuck on semantics here, but inflation absolutely has an effect on ones earned benefit.

Before age 60, as the national wage index increases so do the inflation factors that are applied to every year of your past earnings.

Technically, the only year that really matters is for the year you turn age 60 -- when your PIA is calculated. But if the wage index is increasing every year leading up to this point, than that would tend to favor a larger initial benefit.

I haven't had earned income in about 10 years, but my forecasted SS benefit has been increasing each year due to this effect.

Gumby's post (#31 above) gets into some of the details with references.

-gauss

 

[JJpop]

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.

If high inflation is temporary and we go back to what it has been, a big raise again in 2023 is going to be very beneficial for potentially many years.
It will make those 2 or 3 pct increases better forever.

I am quite happy with this inflation if it is temporary with what it has done for our SS and IBonds.

 

[Perryinva]

It’s all about the compounding. The so called “break even” point gets shorter if COLAs are large and the market is dropping along with low interest rates. In other words, claiming early to invest that amount doesn’t do as well as the delayed increases due to COLA. BUT it really only steepens the curve approaching and past the “break even”, where most “file early” proponents typically say they will probably never see.

I’ve watched my age 70 SS amount increase from around $44/k to well over $50k for next year. Even my FRA amount increased about $4k over the last 5. It makes delaying a little easier to accept.

 

[ivinsfan]

I'm in the camp that it can get pretty ugly.

I think there is a smoldering but building resentment of the younger generations toward the baby boomers. They are seeing the country deteriorate across a spectrum of areas and see a life in front of them that is considerably worse than their parents. A country that has enormous debt, a country where many of them are being priced out of being owners (e.g. housing), where they just can't seem to get ahead. I'm not here to argue that perception is universal (it certainly isn't), nor absolutely accurate...but I do believe it is a growing perception and feeling.

I believe that is why some of them have "dropped out" and so many places are finding it difficult to hire. WHY work, what's the point?

So, it might be interesting when come January and beyond when "boomers" get their 8 or 9 or 10 or more % benefit uplift when many of the younger have minimum wage jobs (or even worse if a recession comes no job). When they see the reigns of power controlled by boomers still hanging on.

Excuse me? Why work what's the point and somehow it's blamed on the Boomers SS increases.

 

[Midpack]

Maybe we are getting stuck on semantics here, but inflation absolutely has an effect on ones earned benefit.

Before age 60, as the national wage index increases so do the inflation factors that are applied to every year of your past earnings.

Technically, the only year that really matters is for the year you turn age 60 -- when your PIA is calculated. But if the wage index is increasing every year leading up to this point, than that would tend to favor a larger initial benefit.

I haven't had earned income in about 10 years, but my forecasted SS benefit has been increasing each year due to this effect.

Gumby's post (#31 above) gets into some of the details with references.

-gauss

+1. There are several posts in this thread that are inaccurate as I understand SS. BOTH current and future (yet to file) SS beneficiaries all benefit in a similar way with each annual SS COL adjustment. I haven’t filed yet and I’ve watched my estimated benefits go up every year despite not working for 11 years.

 

[Perryinva]

The wage index has many times outpaced inflation/COLA. It can easily be seen on the SSA charts over the years. ROUGHLY track each other is a good description, I think, too. Before I was 60, and already had my 35 max years, I often looked at the increases and they were never exactly the same as the reported COLAs.

It is true that the SS COLA is only directly applicable once one hits 62. For this bout of inflation, I think it will be a net positive for current “high past income” SS recipients. Typically we see permanent or near permanent rises in the cost of things due to inflation. But I personally think that the main drivers for this bout will not be permanent. They will subside, probably not to the previous levels of course.

Historically, high SS COLAs have been followed by low/none after the prices rebound and there are 0 COLA compared to that previous year. But the large bumps remain. I believe just 2022 & predicted 2023 increases combined will exceed, what, the 10 previous years combined?

 

[Turbo29]

Excuse me? Why work what's the point and somehow it's blamed on the Boomers SS increases.

Lot's of Boomers are able-bodied and seem quite content to sit home and collect their SS benefits instead, said benefits being paid for by those who are currently working.

(I'm in the Boomer age group, just playing devil's advocate here.)

 

[TheWizard]

Lot's of Boomers are able-bodied and seem quite content to sit home and collect their SS benefits instead, said benefits being paid for by those who are currently working.

(I'm in the Boomer age group, just playing devil's advocate here.)

The SSA and Congress make the rules, not us boomers...

 

[ivinsfan]

Lot's of Boomers are able-bodied and seem quite content to sit home and collect their SS benefits instead, said benefits being paid for by those who are currently working.

(I'm in the Boomer age group, just playing devil's advocate here.)

Wait I think this could be the next Washington Post financial article..Boomers blame yourself when your favorite store closes, it's your fault!

 

[TheWizard]

Wait I think this could be the next Washington Post financial article..Boomers blame yourself when your favorite store closes, it's your fault!

I do!
A few local restaurants closed both before and after COVID and I said that we shoulda gone there more often, to keep them in business...

 

[Chuckanut]

Excuse me? Why work what's the point and somehow it's blamed on the Boomers SS increases.

IMO, there are people who enjoy and profit setting one group against another. The Boomer vs young folks is another example. Who benefits from such a conflict?

FWIW, have not many young persons taken advantage of interest rates that were unheard of when I was the same age? All the while my savings earn 0.5% in an inflation that is many times that. I don’t begrudge or blame the young people. It is simply what is.

 

[martyp]

I am currently looking forward to a 6.25% increase of my pension starting July 1st. A 6% SS increase is icing on the cake. I live in Thailand and the exchange rate is improving my buying power as well.

 

[Gumby]

Based on today's CPI numbers, the 2023 Social Security COLA will be at least 7.3%

 

[aja8888]

Based on today's CPI numbers, the 2023 Social Security COLA will be at least 7.3%

I'm thrilled to hear that. I'm sure that will be more than the annual Medicare rate increase and the income taxes I have to pay on most of the SS I receive.

 

[SecondCor521]

I'm thrilled to hear that. I'm sure that will be more than the annual Medicare rate increase and the income taxes I have to pay on most of the SS I receive.

I'm guessing that's a bit tongue-in-cheek, but I did see a note saying that Medicare rates might go down (in an absolute sense) in 2023. The explanation was that the expensive Alzheimer's drug that they raised rates for in 2022 has not panned out somehow.