Seniors on Social Security will be getting their largest raise in decades. Seniors have received cost-of-living adjustments in the past, but beneficiaries will receive a 5.9% adjustment.
It's a good chance that your upcoming raise won't be much to write about. Here's why.
The image is from the same source.
1. Inflation is out of control.
The reason Social Security benefits are getting a big boost is that the Consumer Price Index rose during the third quarter. It wasn't shocking to see higher numbers than usual because of the recent levels of inflation.
Let's get back to the 5.9% COLA. It might seem like a boost to benefits. In October, the inflation rate was 6.2%, which is higher than what next year's cost of living allowance will account for.
Seniors aren't likely to get much buying power out of that 5.9% COLA because the cost of everyday living expenses has gone up. Consumers are paying more for things like groceries, gas, and apparel. They're not going to get ahead because of a 5.9% increase.
Seniors on Social Security and Medicare pay their Part B premiums from their benefits. Medicare Part B costs can rise from year to year. Part B is climbing in a big way.
Part B costs are going to go up next year. That's an increase of $29.60 It's a high enough increase that it will wipe out a third of seniors' upcoming COLA.
$170.10 is the standard monthly Part B premium. Those subject to Part B surcharges may be less dependent on Social Security as an income source than those eligible for the standard monthly premium.
Next year's Social Security raise could be less meaningful because of rising Part B costs. This applies to seniors who have Part D drug plan costs increasing.
Social Security COLAs are supposed to help seniors keep up with living costs. COLAs fail in that regard a lot. They may allow seniors to keep up with expenses, but they're not likely to make it possible for beneficiaries to get ahead.
Seniors shouldn't rely on COLAs to shore up their finances. Rather, they may need to take steps like finding a part-time job to boost their income and free up money for rainy days.
Seniors who own homes may have more options. Home value is up right now, and those who sell can walk away with a nice amount of profit. It is possible to invest that money to serve as a supplemental income source to take the pressure off of Social Security. It could be useful if the COLAs aren't as significant in future years, which is a possibility based on the way they've trended over the past decade and change.
