If the cost-of-living adjustment (COLA) for social security benefits increases to over 10.8% by 2023, social security benefits could amount to a $1,500 increment by that year. This increase in benefits would be due to the current inflation rate, which is by far the highest in over four decades.
Since the inflation cuts across the board, will the increment in COLA on social security benefits improve the living situations or buying power of the nation’s senior citizens? The answer to this question is still up in the air. While some say that the increase in COLA on social security benefits will help improve the living situations and buying power of America’s senior citizens, others are not so sure. It is still too early to tell what impact, if any, this change will have. ..
COLA could increase to about 10.8%
How the cost-of-living adjustment is calculated?
The Coca-Cola Company calculates its inflation rate by averaging the Consumer Price Index of Urban Consumers in the third quarter of each year. This is then compared to the CPI for the same period in the previous year. This calculation uses the Consumer Price Index of Urban Consumers as its base.
The Social Security Administration has released the inflation rate for the first month of the third quarter of the year 2022. This rate is about 9.6%. This suggests that social security beneficiaries, especially the senior citizens, have to cover up somehow for the merger increment of 5.9% increment they saw in their COLA this year.
Social Security benefits will not increase in 2019 due to the current inflation rate. This means that seniors will not receive a pay raise until January 2023. ..
How inflation rate impacts taxpayers and interest rates?
The government is employing the use of increments in interest rates to increase its overall revenues in order to reduce inflation. ..
The Federal Reserve has announced that they will be increasing interest rates in order to reduce demand for goods and drive down their prices. This could help the government fund its operations without having to borrow money. ..
If inflation rates do not decrease, there could be an impact on taxpayers. As we all know, the taxes paid by working people go to pay social security benefits for seniors and others. With the rise in inflation, Social Security trust funds will deplete. ..
The Social Security Administration will have to increase COLA payments to social security beneficiaries. This suggests that the maximum income subject to social security tax payment will have to also shoot up from the $147,000 it is currently.
The social security tax rate for self-employed individuals and employers will increase if inflation rates persist. This is to ensure that the social security trust fund does not deplete beyond repair. Right now, the Social Security Administration has reported that its payouts far outweigh its revenue. This poses a problem for the near future.
Impact of Medicare on COLA increase
Since inflation would impact Medicare, it is safe to say that the increase in Social Security benefits may not exactly be of impactful benefits to social security beneficiaries. This is because the Medicare charges are removed from their social security checks before they are paid. ..
Medicare is set to reduce the amount it pays for high-maintenance patients’ care, potentially costing them a significant portion of their COLA increase. This means that those seniors with conditions that require a lot of care may not see as much of a benefit from the annual increase in their benefits. ..
Starting from January 1, 2013, social security benefits will no longer be the only source of income for people who have outstanding debt from before this date. Other sources of income, such as pensions and wages from extended services, will now be accepted. ..
Since we only have the inflation rate for July for now, it is too early to conclude that the inflation rate may increase beyond what it is currently. So, keep your fingers crossed and your hopes high. Things could take a good turn soon. ..
The COLA for every year is based on the inflation rate for the third quarter of the year. This goes to show that the COLA for 2022 will be announced in November and it will take effect in January 2023.
Social security for other groups like the injured, unemployed, those earning below minimum wage, etc., also benefits from COLA increments.
The COLA affects salaries too because inflation increases the cost of living. This implies that the current salaries will not be enough for people anymore and thus needs to be adjusted as necessary.
