Social Security Benefits Will Increase 8.7% Next Year

Social Security
Courtesy of 401(K) 2012 (Flickr CC0)

Social Security benefits will increase by 8.7% next year, the largest increase since 1982, according to the Social Security Administration.

The average annual increase in retired worker benefits was 4.5% between 2018 and 2019. It may have been higher if not for the recent recession. The average monthly benefits for retired workers under 65 will be $1,350 in 2020. Their spouses under 65 will be up from $1,318 this year and $1,299 in 2018. A couple who retired at 66 would receive an average of $1,432 per month in benefits in 2020. The figures exclude any taxes paid into Social Security or Medicare by those with higher incomes.

The COLA is the increase in Social Security benefits that a recipient can expect to receive each year. It’s based on the Consumer Price Index for Urban Wage Earners. Also, Clerical Workers (CPI-W), track inflation for the average American worker. The COLA last increased by 8% in 1982 when President Ronald Reagan signed an executive order. In addition, raising benefit levels across America by $1 (to $104).

Since then, no president has ever attempted to raise or lower it again. Instead, they have focused on reducing taxes so that more Americans could afford their own retirement plans. The increase in your monthly check will vary depending on your income and other factors.

A rise in consumer prices can cause an increase in Social Security benefits.

If you receive more money from Social Security than what you would have otherwise spent then those funds are added back onto your benefit amount as well. Consumer prices have risen steadily in recent months, particularly for gasoline and other transportation costs. Overall, consumer prices excluding food and energy items like housing rose 2.4% over the past year,” said Mary Johnson.

Workers covered by Social Security are likely to get a small boost in take-home pay because the maximum amount of earnings subject to the payroll tax will rise to $122,500. A senior couple living on a fixed income is likely to face higher costs for food and health care. On the other hand, if you’re living off of an extremely high salary then there’s a good chance that the price of gas or groceries will go up by 1% next year — and this might cause them to decrease by 8.7%.

Consumer prices have risen steadily in recent months, particularly for gasoline and other transportation costs.

Overall, consumer prices excluding food and energy items like housing rose 2% over last year after adjusting for inflation.

A senior couple living on a fixed income is likely to face higher costs for food and health care as well as most goods and services, such as housing or transportation. Many seniors also have to pay for transportation and housing, which can be expensive when you’re getting older. If your income isn’t sufficient to cover these basic expenses — and this includes taxes that you’d normally pay at work — you could find yourself financially vulnerable in retirement.

Social Security benefits are about to grow more than at any other time in the past 35 years

The index has risen 2% since January 2017, but it will jump another 1.8% next year and then fall ever so slightly before dropping off again starting in 2022.

If your income is low enough that you qualify for automatic increases, then your check will go up 8.7%. If your income is high enough that you’re not eligible for an increase due to age (you have to be at least 62), then you’ll receive a smaller boost — 4%.

Written By Armon Evans

Sources:

CNN: Social Security recipients get 8.7% cost-of-living increase, the highest in more than 40 years By , CNN

NBC NEWS: Social Security Administration announces 8.7% cost of living increase for 2023 beneficiaries By

ABC NEWS: Social Security benefits to jump by 8.7% next year By FATIMA HUSSEIN Associated Press

Top and Feature Image Courtesy of 401(K) 2012 Flickr Page – Creative Commons License

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