AS inflation is causing major concern in the US due to rising prices, a massive benefit increase for retirees has been projected in 2023.
Next year's COLA is anticipated to be higher than the 5.9 percent for 2022 as a consequence of the spiraling Consumer Price Index (CPI).
According to the Senior Citizens League, the current projected COLA for 2023 is 8.9 percent, which is a whopping three percent more than in 2022.
The average monthly benefit from the COLA is currently $1,657, but this will climb to $1,804 in 2023 if the corrected number is used.
The CPI increased to as high as 8.5 percent for the 12-month period ending March 2022, the highest rise since the period ending December 1981.
Read our COLA 2022 increase live blog for the latest news and updates...
How scammers work, continued
Scammers may try to threaten you with arrest if you do not pay a supposed fee or fine.
Scammers have also sent pictures of fabricated government badges, use false identification numbers, and mail using fake Social Security Administration letterhead.
“The Social Security Administration will never tell someone to wire money, buy gift cards or pay with cryptocurrency,” said Gail Ennis, inspector general at the Social Security Administration.
“If anyone does ask you that, you know it’s a scam.”
How scammers work
The acting commissioner of the Social Security Administration Kilolo Kijakazi said scammers use fear in order to get people to act without thinking, during a press call in March.
Fraudsters use a number of tricks to try to gain important personal information such as your Social Security number or bank account details.
Reporting Social Security scams
If you suspect an email you got from the Social Security Administration may be fraudulent, you’re urged to avoid responding or clicking on any links in the message.
The SSA said you should report the email by forwarding it to the US Computer Emergency Readiness Team (US-CERT) at [email protected].
Avoiding Social Security scams
The Social Security Administration said Americans can avoid fraudulent calls and internet “phishing” schemes by not revealing personal information, clicking malicious links, or opening suspicious attachments.
The agency said most emails from Social Security will come from a “.gov” email address.
If an email address does not end in “.gov”, use caution before opening attachments or clicking on pictures or links.
You can learn more about how to protect your personal information and online account on the administration’s security webpage.
Why does Social Security tend to not go far?
The maximum benefit is $3,345 a month for someone who files for Social Security in 2022 at full retirement age (FRA).
FRA is the age at which you qualify for 100 percent of the benefit calculated from your earnings history.
This is $40,140 annually. However, the average rent in the United States is about $1,100 to $1,200.
This leaves a retiree with $25,740 annually, which is just above the poverty line.
When you plan for retirement, it’s important to remember that Social Security is only meant to cover about 40 percent of pre-retirement income.
2023 COLA could be larger than 2022
At least one group has predicted that the cost-of-living adjustment for Social Security recipients in 2023 might be as high as 7.6 percent or 8.9 percent, significantly higher than this year’s, which is already the highest in decades.
The Senior Citizens League, a non-partisan advocacy group, provided the 2023 COLA projection.
According to GoBankingRates.com, it based its forecast on the most recent consumer price index data.
When did COLA 2022 increase take effect?
The cost-of-living-adjustment (COLA) rise of 5.9 percent came into force on January 1, 2022.
The COLA is calculated based on data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures changes in the cost of popular goods and services.
How is COLA calculated?
“COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). CPI-Ws are calculated on a monthly basis by the Bureau of Labor Statistics,” the Social Security Administration shared.
Additional help for recipients
The Social Security Administration is informing recipients about help available for homeowners and renters during the coronavirus pandemic.
Financial help can affect eligibility for Supplemental Security Income (SSI) or monthly SSI amounts.
However, emergency financial assistance received from the following programs and funds will not count against a recipient’s eligibility or payment amount, according to the Social Security Administration:
- Emergency Rental Assistance Fund
- Emergency Assistance for Rural Housing/Rural Rental Assistance
- Homeowner Assistance Fund
- Housing Assistance and Supportive Services Programs for Native Americans
An even higher COLA for 2023?
In March, the Senior Citizen League found that the 2023 COLA could be as high as 7.6 percent based on the latest Consumer Price Index data, reports CNBC.
But due to increasing inflation, the League announced at the end of April that the current predicted COLA for next year is set to be 8.9 percent.
Though the average monthly COLA benefit currently stands at $1,657, the adjusted figure would increase next year’s benefit to $1,804, reports Marca.
Increases on resource limits
The resource limit for households will increase by $250 to $2,500 for the continental states and the District of Columbia, Alaska, Hawaii, Guam, and the US Virgin Islands.
The resource limit for households where at least one person is age 60 or older, or is disabled, will also increase by $250 to $3,750.
Claiming full benefits
Your full Social Security benefit depends on the age you retire.
If you retire at 67, which is the full retirement age, in January 2022, your maximum benefit would be $3,345.
If you retire at age 62 in 2022, your maximum benefit would be $2,364, according to the Social Security Administration.
If you retire at age 70 in 2022, your maximum benefit would be $4,194.
The SSA also confirmed that the maximum amount of earnings subject to Social Security tax would increase this month.
This will increase from $142,800 to $147,000, following an increase in average wages.
Why you should retire at 70, continued
If you delay benefits for an additional 12 months, you’ll receive 108 percent of the monthly benefit and if you wait until 70, you’ll receive 132 percent.
If you fully take advantage of everything from your work and earnings history to delaying your claim — it’s possible you can earn the maximum Social Security benefit.
In 2022, the maximum benefit will be boosted to $4,194 a month.
Why should you retire at 70?
Waiting to retire at 70 before claiming Social Security benefits gives you more for not retiring at 62.
If you claim at 62, you could see your benefits reduced as much as 30 percent, according to the Social Security Administration.
If you wait until your full retirement age, you’ll get 100 percent of your monthly benefit.
Understanding COLA, part three
Inflation rates throughout the 1970s varied from 3.3 percent to 11.3 percent. In 1975, the COLA was increased by 8 percent, while inflation was at 9.1 percent.
In 1980, the COLA hit its highest point in history, at 14.3 percent, against a 13.5 percent inflation rate.
Small COLA increases of 2 percent to 3 percent per year were common throughout the 1990s, thanks to dramatically reduced inflation rates.
Even lower inflation rates in the early 2000s resulted in no COLA adjustments in 2010, 2011, and 2016.
Understanding COLA, continued
In 1975, Congress adopted a COLA provision that provided automatic yearly COLAs based on the annual increase in the CPI-W.
Prior to 1975, Congress enacted special legislation to boost Social Security payouts.
COLAs in 1975 were calculated using the rise in the CPI-W from the second to the first quarter of 1974.
They were based on increases in the CPI-W from the previous year’s first quarter to the current year’s first quarter from 1976 to 1983; since then, COLAs have been based on the CPI-W from the previous year’s third quarter to the current year’s third quarter.
Because inflation was significant in the 1970s, COLAs were utilized to safeguard compensation-related contracts, real estate contracts, and government benefits.
The CPI-W is determined by the Bureau of Labor Statistics (BLS), and it is used by the Social Security Administration (SSA) to calculate COLAs.
The COLA formula is calculated by multiplying the percentage rise in the CPI-W from one year’s third quarter to the next year’s third quarter.
On the SSA website, this information is updated on a regular basis.
What are Social Security credits?
To collect Social Security benefits, you must have met the minimum requirement of performing “enough work”.
The Social Security Administration (SSA) defines “enough work” as earning 40 Social Security credits.
In 2022, an individual will earn one Social Security credit for every $1,510 in covered earnings.
You can get a maximum of four Social Security credits each year, and you must earn $6,040 to get the maximum of four credits.
Therefore, to earn 40 credits you must work for at least 10 years.
You are able to earn more than 40 credits.
However, 40 credits is the minimum number you need to be eligible for Social Security benefits.
When did COLA begin?
Cost-of-living adjustments began when legislation was passed in 1973.
The intention is to use COLAs for Social Security and Supplemental Security Income (SSI) benefits to keep up with inflation rates, according to the Social Security Administration.
The COLA is calculated based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
When the CPI-W drops or remains unchanged, Social Security recipients are generally not given a COLA.
In October 2021, the SSA said it would increase the COLA to 5.9percent this year.
It represents the largest increase since the 1980s.
What is delayed retirement credit, part two
You can begin to receive Social Security retirement benefits as early as age 62, but it will reduce your benefits by as much as 30 percent below what you would get if you waited to retire until your full retirement age.
If you wait until your full retirement age (66 for most people), you will be able to obtain your full benefits.
What is delayed retirement credit?
If you wait until age 70 to start achieving your benefits, the Social Security Administration will increase your benefit, since you gained delayed retirement credits.
The retirement benefits are then paid out until you die.
The age you begin receiving your retirement benefit affects how much your monthly benefits will be.
What was the 2021 COLA?
The 5.9 percent cost-of-living adjustment (COLA) for 2022 is a big jump from the 1.3 percent COLA in 2021.
The significant increase was driven by a rise in inflation over the past year.
Alternatives to COLA
Some have questioned the methodology used to determine the cost of living adjustment, according to TheBalance.com.
The SSA bases its COLA hikes on the CPI-W.
The spending habits of urban wage earners and clerical employees are used to create this index.
The index is made up of people who are employed and earning money. They aren’t retired people.