Seniors, you can start dancing and crooning “We’re in the Money” like the legendary Ginger Rogers in the classic motion picture musical Gold Diggers of 1933. With rampant price inflation roaring throughout the US economy and showing no signs of coming down at a significant level, Uncle Sam is prepared to give you a raise in your monthly Social Security benefits. While the extra few dollars a month is helpful in this type of market, can Washington afford to dole out more money than it has in its possession? If the fiscal picture for the Social Security Administration (SSA) was already bleak before the Consumer Price Index (CPI) hit a 40-year high, imagine what it will look like in the new permanent inflation environment.
Drinking Whiskey and COLA
In the good old days of 2021, inflation was trending just below 6%. This sky-high Bidenflation figure prompted the SSA to raise its cost-of-living adjustment (COLA) by $92 to $1,657 per month. Benefits for the typical couple also increased by more than $150 to $2,753 a month. Plus, the federal Supplemental Security Income (SSI) benefits swelled to $841 for individuals and $1,261 for couples.
This was impressive for a monthly payment that ostensibly fell behind the curve and had handed retirees only an average COLA of 1.65% in the last decade. Older Americans are poised for another year of incredible growth in benefits, thanks to inflation higher than 8%.
It is estimated that the SSA would lift its COLA to as high as 8%, according to Stephen Goss, the chief actuary of the Social Security Administration. This would mean an extra $132 per month in early 2023 for seniors, adding to the average check of $1,790. If accurate, it would be the largest annual gain since 1981, when recipients enjoyed an 11.2% boost.
But SS relies on a slightly different inflation measurement: the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W. This is utilized as a benchmark for most retirement benefit plans because the CPI-W reflects movements in the cost of benefits. “Looking at the CPI-W trends we’re seeing so far this year, it’s likely we’ll have a COLA closer to 8% than to 3.8%,” Goss stated during a recent webinar with the Bipartisan Policy Center on Social Security. “They will get a relatively high increase in their benefits.” The estimate is in line with the forecast from the Senior Citizens League, a nonpartisan group.
(Photo illustration by Kevin Dietsch/Getty Images)
The final COLA percentage will come out in October and take effect in December. Is this enough, though? One recent study discovered that SS benefits need to provide seniors with $1,876.70 a month to maintain the same purchasing power as retirees of 22 years ago. Some also purport that the CPI-W is not an accurate gauge of seniors’ living expenses. Instead, the Consumer Price Index for the Elderly (CPI-E) is a better mechanism to determine how much seniors pay, especially since their daily living costs are weighted differently from that of a millennial or Generation Zer.
Still, while a boost in monthly checks is great for cash-strapped seniors who need to clip coupons to survive week to week, the long-term health of Social Security will come into question again.
Bidenflation Poised to Kill Social Security?
Social Security is running out of cash. The gap between how much it pays out and how much it receives has widened. Last year, the trustees’ report projected that the retirement scheme would post cash deficits of $2.4 trillion over the next decade. Financial experts assert that SS will never declare bankruptcy, but they concede that the retirees in the next 20 years might not receive the same level of benefits. As a July 2021 study discovered, 71% of Americans are concerned that Social Security will run out of cash in their lifetimes. Whatever the case may be, the entire entitlement structure, much of which is based on the principles of Ponzi schemes, is on the verge of collapse. In the future, the government will need to weigh making interest payments on the debt or keeping 100% of retirement benefits. This choice is due to years of government malfeasance.
