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

[RetiredHappy]

You are missing TJs point - the AGI levels at which 0% or 50% or 85% of SS benefits are taxed are NOT indexed to inflation. So more people are taxed on 50% or 85% every year even though their SS is worth the same, accounting for inflation.

Ah, but for many of us, we are subject to 85% amount that is taxable so it does not matter how much SS benefits go up.

 

[googily]

I had forgotten about this. While it doesn't impact me (older), this is a big hit on those who are 61 this year.

Here's a stumper for Gumby. My husband would have turned 61 this year had he lived. Do survivor's benefits have that same issue with the COLA adjustment? I don't plan on taking it for another 4 years. I know they don't do the COLA at age 61 in case the retiree decides to start at 62, but there's no chance of benefits on DH's record starting next year....?

 

[Katsmeow]

Wondering...

Would you rather have 1% inflation and get a 1% SS increase?

Or have 9% inflation and have a 9% SS increase?

I'm sure it would depend on which inflation number I'm talking about, but it's more of a hypothetical question. In theory, shouldn't matter. I guess if you're a net saver, might be good to have the bigger numbers.

Well, it depends upon what the 9% inflation mostly consists of. If it is goods that I don't usually buy then I would rather have the 9%.

 

[marko]

BTW, the tax limits on SS don’t adjust with inflation, so you’ll be paying more in taxes. Ditto for AMT I think.

This reminds me of when I was given a $90,000 Mercedes as a company car. A (jealous?) coworker commented that I'd have to pay taxes on the lease payments.

" So I can get rid of my own car, get to drive one of the finest cars in the world, complete with free gas and insurance and its only going to cost me an extra $2,000 or $3,000 in taxes a year?.......oh!...ok!"

Yes, I'll take the SS raise. I'm already paying taxes on SS and I'm still ahead of the game.

 

[camfused]

It's a permanent one-time large bump in everyone's amount, upon which all future COLAs will be built on. Consumer prices may level or even go down, but this will never go down.
I am sorry, but I don't see the downside.

 

[copyright1997reloaded]

It's a permanent one-time large bump in everyone's amount, upon which all future COLAs will be built on. Consumer prices may level or even go down, but this will never go down.
I am sorry, but I don't see the downside.

The "downside" is the issue that inflation (even if it today isn't in the things you are buying) tends to work its way through all aspects of economic life. This makes sense because others are being affected and thus it will change their buying, their labor, and so on. We are already seeing this, as price growth has moved from base commodities and is now impacting things like services.

The "downside" is if the inflation rate stays elevated (i.e. prices keep going up) or doesn't fall fast enough, it impacts capital allocation and investment in new projects that would result in productivity improvements which in turn results in better standards of living.

I would respectfully say "it isn't all about you". Having the United States become Argentina is not a good thing, even if you happen to be one of the few being able to eat good meat and drink good wine. [And I would add that very very few of those who are mostly on fixed income would be a winner. Past high inflationary scenarios in a variety of countries have shown what I've stated to be true -namely that those who lend (e.g. fixed income) are big time losers, most are big time losers, and only those who have land/food have a chance to "win" in that scenario.]

Another thing to think about: What do you think will happen (in terms of our society) if only the rich retired boomers have good standards of living while the younger workers fall further and further behind? What do you think would eventually happen to social security?

 

[Gumby]

The "downside" is the issue that inflation (even if it today isn't in the things you are buying) tends to work its way through all aspects of economic life. .....

The social security COLA does not cause inflation, it is the result of inflation. I agree with you that we don't want to have entrenched high inflation because it is bad for society, but we can't change what has happened over the past year, and I'd like at least some chance to stay even. So I will take my raise with a clear conscience.

This reminds me of when I was given a $90,000 Mercedes as a company car. A (jealous?) coworker commented that I'd have to pay taxes on the lease payments.

" So I can get rid of my own car, get to drive one of the finest cars in the world, complete with free gas and insurance and its only going to cost me an extra $2,000 or $3,000 in taxes a year?.......oh!...ok!"

Yes, I'll take the SS raise. I'm already paying taxes on SS and I'm still ahead of the game.

I've seen your co-worker's thought process before -- "I don't want to earn more money, because I'll just pay more taxes" - and I find it baffling. Unless the marginal tax rate exceeds 100%, more money is always better. I will concede that there are certain income "cliffs" in the tax code where the marginal rate could exceed 100% over a small range (IRMAA, ACA), but that is rare. Now, on the job, one could reasonably conclude that the marginal value of extra income is not worth the extra time needed to earn it, but that's a different issue.

 

[aja8888]

I just figured out that our *estimated* increase in SS this coming year will cover the 25% increase we just got in house/car insurance (and I shopped it) and the $600 per year increase in HOA annual dues with a few bucks left over.

I estimated some income tax being paid on the SS increase and added a few dollars for Medicare premiums possibly being increased also.

The estimated SS COLA increase is all spoken for in 2023.

 

[Chuckanut]

Another thing to think about: What do you think will happen (in terms of our society) if only the rich retired boomers have good standards of living while the younger workers fall further and further behind? What do you think would eventually happen to social security?

+1

And it can come back to affect you in ways one may not have foreseen. For example, in my area, the cost of housing has skyrocketed over the last decade. My home has greatly increased in value. Yippee!!! I am worth more!!! Great!!! Right? Not so fast. Most of my peers have also seen at least one or more of their children move far away because they can't afford to buy a home in the area they grew up in. Not so good. Like my old grandpappy used to say, "Be careful what you ask for. Somebody may give it to you."

 

[ShokWaveRider]

Speculators - Not long to wait now, next week will give us the 3rd. month of CPI-W. Then Gumby will give us the actual %.

 

[aja8888]

Speculators - Not long to wait now, next week will give us the 3rd. month of CPI-W. Then Gumby will give us the actual %.

I'm glad Gumby has found something useful to do with his time now that he is retired from his Law practice!

(we do appreciate the effort he puts in!)

 

[daylatedollarshort]

Wondering...

Would you rather have 1% inflation and get a 1% SS increase?

Or have 9% inflation and have a 9% SS increase?

I'm sure it would depend on which inflation number I'm talking about, but it's more of a hypothetical question. In theory, shouldn't matter. I guess if you're a net saver, might be good to have the bigger numbers.

I would prefer the 9% inflation and a 9% SS because I try to keep our personal inflation rate negative every year, we have a low fixed rate mortgage, we have a high allocation to TIPS, over time our house will go up in value more, and our property taxes are capped. What hurts currently are the negative real interest rates, but the Fed seems to be fixing that.

 

[SecondCor521]

I estimated some income tax being paid on the SS increase and added a few dollars for Medicare premiums possibly being increased also.

I thought the government indicated that Medicare premiums would be dropping for 2023? Something mumble mumble to do with the new Alzheimer's drug not gonna happen mumble mumble for which they raised rates in 2022...

 

[aja8888]

I thought the government indicated that Medicare premiums would be dropping for 2023? Something mumble mumble to do with the new Alzheimer's drug not gonna happen mumble mumble for which they raised rates in 2022...

I forgot about that. I'll subtract about $5 month then.

Does anyone know if Medicare will be increasing the medical deductible amounts this year as they do every year? Oh, and should I add in increased premiums for Part D (drug plans) and drug cost increases?

 

[Calico]

I forgot about that. I'll subtract about $5 month then.

Does anyone know if Medicare will be increasing the medical deductible amounts this year as they do every year? Oh, and should I add in increased premiums for Part D (drug plans) and drug cost increases?

The Part B premium is dropping $5.20, from $170.10 to $164.90.

The Part B deductible is dropping $7.00, from $233.00 to $226.00.

Costs for Part D will vary by plan.

 

[jebmke]

^ yes; my Part D plan is going actually going down pre-IRMAA ($12.90 --> $10.50). I still haven't figured out what to do with the extra $7.40 per month.

 

[Calico]

^ yes; my Part D plan is going actually going down pre-IRMAA ($12.90 --> $10.50). I still haven't figured out what to do with the extra $7.40 per month.

My Part D is going down a whopping $1.80 per month!

I'm going to try not to spend the whole $14.00 in one place.

 

[copyright1997reloaded]

The social security COLA does not cause inflation, it is the result of inflation. I agree with you that we don't want to have entrenched high inflation because it is bad for society, but we can't change what has happened over the past year, and I'd like at least some chance to stay even. So I will take my raise with a clear conscience.

I'm well aware that the COLA reflects increases in prices that have already occurred. If not, I would have likely gotten really bad grades as an Econ major (well that was long ago so who knows how they grade now). But your statement that it doesn't cause inflation is suspect. Inflation is a monetary phenomenon, and things that increase deficit spending act as stimulus to the money supply. Note that I am not saying that it is the cause of all inflation, just that it, along with student debt forgiveness, other deficits, and things like federal reserve QE or lowering of reserve requirements all act as to increase the money supply and/or increase velocity.

Nor am I saying you should not have a clear conscience. I am simply railing against the thought process that inflation is "good", even when various news organizations through their propaganda made out that it was, e.g. that it affects the rich more than the poor.

Inflation hurts savers, and those w/o assets that tend to go up with inflation. People with a fixed pension (including many on ER.org) are hurt by inflation. People with a large percentage of their assets in fixed instruments is hurt by inflation (e.g. Vanguard BND is down 15.74% YTD).
People who rent will be hurt as prices go up, they don't have a fixed rate mortgage to rely on.
And so on.

Most will be losers as a result of inflation, including many on here who think they are now getting a good return because we can get 4% on a US Treasury.
(And I say that as someone who has put some $ in T-Bills.)

 

[11522914]

Most will be losers as a result of inflation, including many on here who think they are now getting a good return because we can get 4% on a US Treasury.
(And I say that as someone who has put some $ in T-Bills.)

Inflation aside I am getting a good return. In January it was what .005%. I'm earning 8 times more.

Problem is, it's just not enough !!

 

[RASAP]

My Part D is going down a whopping $1.80 per month!

I'm going to try not to spend the whole $14.00 in one place.

Look closer - many other items may have increased. Foe me, my premium went down but tier 1 and 3 drug costs went up. So did my deductible. Overall, an increased in the annual cost.

 

[Calico]

Look closer - many other items may have increased. Foe me, my premium went down but tier 1 and 3 drug costs went up. So did my deductible. Overall, an increased in the annual cost.

I take one Tier 1 drug, which went up $1, and it is not subject to the deductible. I'll be saving money all around.

 

[jldavid47]

I don’t even bother. I wait for the Gumby Report.

I'm gonna try to beat Gumby to the punch this month. My spreadsheet is ready!

 

[marko]

Look closer - many other items may have increased. Foe me, my premium went down but tier 1 and 3 drug costs went up. So did my deductible. Overall, an increased in the annual cost.

All I know is that our medical insurance cost is going to drop by $15,000 as DW hits 65 in four months. $20k I don't have pull out of the IRA.

Everything else is noise from my perspective.

 

[Time2]

Well, it depends upon what the 9% inflation mostly consists of. If it is goods that I don't usually buy then I would rather have the 9%.

The 9% is a killer, a $2M portfolio now can only buy $1,820,000 worth of stuff. 9% gives you a $180,000 loss and it's not like the stock market loss of (21%) $420,000 where, the saying is, "you haven't lost anything until you sell." Yes, hopefully we will see it comeback.
Hmm, down $600,000, I wonder why that happened?

 

[camfused]

^^^ This is precisely why, with the bucket system, you have a cash bucket, to weather this storm.