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Social Security Number Theft

Social Security’s cost-of-living adjustment for 2023 is expected to be higher than average

Because Social Security Numbers have become useful in identity theft and other forms of crime, various schemes have been perpetrated to acquire valid Social Security Numbers and related identity information.

In February 2006, the Social Security Administration received several reports of an email message being circulated addressed to “Dear Social Security Number And Card owner” and purporting to be from the Social Security Administration. The message informs the reader “that someone illegally is using your Social Security number and assuming your identity” and directs the reader to a website designed to look like Social Security’s Internet website.

“I am outraged that someone would target an unsuspecting public in this manner,” said Commissioner Jo Anne B. Barnhart. “I have asked the Inspector General to use all the resources at his command to find and prosecute whoever is perpetrating this fraud.”

Once directed to the phony website, the individual is reportedly asked to confirm his or her identity with “Social Security and bank information”. Specific information about the individual’s credit card number, expiration date and is then requested. “Whether on our online website or by phone, Social Security will never ask you for your credit card information or your PIN,” Commissioner Jo Anne B. Barnhart reported.

How Much Is A Social Security Check Per Month

The average $1,656 payment left recipients $43.80 a month shy of keeping pace with actual price increases, according to the Senior Citizens League. If inflation eases next year, as expected, Social Security recipients could close some of that gap, Johnson says..

At the same time, 59% of retirees surveyed by Senior Citizens League in late summer believe theyll face a higher tax liability in 2022 because of the relatively large 5.9% COLA. That includes 21% who worry theyll have to pay taxes on their Social Security payments for the first time after previously falling below income thresholds.

And over a longer period, Social Security recipients have lost buying power. As of March 2021, they had lost 30% of their buying power since 2000 as COLAs grew by about half as much as the cost of goods and services typically purchased by retirees, according to the league.

When Will I Know What My Social Security Benefits Are For 2023

In 2022, retirees saw a record increase in their Social Security checks. Next year’s adjustment could be significantly higher.

The Bureau of Labor Statistics is scheduled to announce inflation data for September on Oct. 13, and the Social Security Administration typically announces the cost-of-living adjustment issues soon after.

Beneficiaries should then receive letters detailing their specific benefit rate in December. If you miss this letter, you can still verify your increase online via the My Social Security website.

The COLA goes into effect with December benefits, which appear in checks received in January 2023.

Social Security payments are made on Wednesdays, following a rollout schedule based on the beneficiary’s birth date: If you were born from the 1st through the 10th of the month, your benefits are paid on the second Wednesday of the month.If your birthday falls between the 11th and 20th of the month, your checks are paid on the third Wednesday, and you’ll see your first COLA increase on your Jan. 18 check.

Those born between the 21st and the end of the month receive benefits on the fourth Wednesday, which, in 2023, is Jan. 25.

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Retired Workers Are Facing A Potential Double Whammy

Superficially, the largest-ever nominal-dollar increase to Social Security checks can be viewed as a positive. But for the 48 million-plus retired workers currently receiving a benefit, Social Security’s 2023 COLA is just another in a long line of disappointments.

To begin with, it’s important to recognize that a large cost-of-living adjustment is a reflection of historically high inflation. Seniors aren’t simply going to be pocketing an estimated 8.7% increase in their monthly payout and living large. Instead, it’s far likelier that rapidly rising food, shelter, and medical care costs — including projected increases in Medicare Part B monthly premiums — will devour most or all of next year’s COLA.

Perhaps the bigger issue retired workers are dealing with is the persistent loss of purchasing power for Social Security income. Since the beginning of 2000, seniors have witnessed the purchasing power of a Social Security dollar decline by 40%, according to a May report from TSCL.

The culprit behind this ongoing loss of purchasing power? The CPI-W.

With no clear path to resolving Social Security’s COLA dilemma, retired workers can expect the purchasing power of their Social Security income to continue falling over time.

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Private Retirement Savings Crisis

2015 Qualified Plan Cost of Living Increases, 2015 Social Security ...

While inflation-adjusted stock market values generally rose from 1978 to 1997, from 1998 through 2007 they were higher than in March 2013. This has caused workers’ supplemental retirement plans such as 401s to perform substantially more poorly than expected when current retirees were investing the bulk of their savings in them. In 2010, the median household retirement account balance for workers aged 55 to 64 was $120,000, which will provide only a trivial supplement to Social Security benefits, but about a third of households had no retirement savings at all. 75% of Americans nearing retirement age had less than $30,000 in their retirement accounts, which Forbes called “the greatest retirement crisis in American history.”

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How To Make The Right Financial Decisions For Every Phase In Life

For most beneficiaries, the coming increase will still fall short of what recipients need to catch up with price increases on food and other consumer goods, Johnson said. Already, 37% of participants surveyed by the Senior Citizens League said they received low-income assistance in 2021. That is more than double the 16% who were receiving needs-based assistance before the pandemic.

“Social Security was never designed to be a sole source of income for people,” Johnson said.

The Social Security Administration is expected to announce the 2023 cost of living adjustment in October after the consumer price index data for September is released.

How Workers Can Get Estimates Of Benefits

The Social Security Administration provides benefit estimates to workers through the Social Security Statement. The Statement can be accessed online by opening an online account with SSA called my Social Security. With that account, workers can also construct “what if” scenarios, helping them to understand the effect on monthly benefits if they work additional years or delay the start of retirement benefits. The my Social Security account also offers other services, allowing individuals to request a replacement Social Security card or check the status of an application.

A printed copy of the Social Security Statement is mailed to workers age 60 or older.

In 2021, SSA began producing Retirement Ready fact sheets, available online and as part of the online Statement, that tailor retirement planning information to different age groups .

SSA also has a Benefits Calculators web page with several stand-alone online calculators that help individuals estimate their benefits and prepare for retirement. These include benefit calculators for spouses, calculators for persons affected by the Windfall Elimination Provision or the Government Pension Offset and calculators to determine a person’s full retirement age or the effect of the earnings test on benefits.

SSA also provides a life expectancy calculator to help with retirement planning.

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Am I Eligible To Get A Cost Of Living Adjustment

You ARE eligible for a COLA increase if you are:

  • Collecting permanent and total disability benefits and your injury was more than 2 years ago OR
  • You were injured prior to December 23, 1991 and are collecting partial disability benefits

You are NOT eligible if:

  • You are collecting temporary total benefits.

You don’t need to apply for COLA benefits as the insurance company should automatically pay you if you’re eligible. The amount of the increase is determined annually and goes into effect on October 1st of each year. If you are collecting Social Security Disability, your COLA may be lower so as not to reduce your social security disability benefits.

Consumer Prices Have Spiked This Year Meaning A Higher Social Security Cost

Social Security cost of living adjustments increasing due to inflation

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High inflation this year means that Social Security benefits will increase about 8.8% next year. That will be the largest cost-of-living adjustment since 1981. That is also higher than the COLA for 2022, which was already a high 5.9%.The estimated average monthly Social Security benefit payable in January 2023 will increase from $1,657 in 2022 to $1,803. The average monthly benefit for a couple who are both receiving benefits will rise $242, from $2,753 to $2,995. And the maximum Social Security benefit for a worker retiring at full retirement age will increase from $3,345 per month to $3,639, an additional $294.

Also, more of workers income will be subject to the Social Security tax in 2023. The Social Security tax will apply to roughly the first $153,000 of earnings, up about $6,000 from $147,000 in 2022.

All of the above are rough estimates. The Social Security Administration will determine the final numbers for 2023 on October 13.

COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers . If prices dont increase and even fall, the COLA is zero. That happened in 2010 and 2011, as the economy struggled to recover from the Great Recession, and again in 2016, when plummeting oil prices swept away any chance of a COLA for that year.

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Social Security Cost Of Living Adjustment Expected To Be Largest Since 1983

The non-partisan Senior Citizens League, who each year predicts the annual cost of living adjustment for Social Security benefits, recently increased its expected 2022 COLA from 4.7% to 6.1%. If the COLA is increased by this amount, it will be the largest annual adjustment since 1983.

This sharp increase over last years 1.3% COLA will be due primarily to the unexpected jump in the costs of housing, food, transportation , apparel and a range of services.

To give you an idea of how significant this expected increase is, the average annual Social Security COLA over the past 10 years has been 1.7%. Thats an increase of over 3 ½ times the past 10-year average! So with the average individual Social Security Benefit of $1,543/month for 2021, this retirement benefit will increase by about $94/month or an annual increase of about $1,129 for 2022.

Now, to be sure, the Senior Citizens Leagues predicted 2022 COLA is only an estimate based on monthly COLA increases up through June and there are other estimates that are less than this estimate, but the Senior Citizens League has a strong reputation in Social Security COLA predictions.

The offset to a Social Security COLA increase is the increase in the Medicare Part B premium for those age 65 and older who are covered by Medicare, as such an increase in this monthly premium will result in a dollar-for-dollar reduction in the real COLA increase.

How Is The 2022 Social Security Cola Calculated

As mentioned, any COLA adjustment is driven by changes in the wage earners consumer price index. National average prices are used, not regional. SSA also calculates the percent change between average prices in the third quarter of the current year with the third quarter of the previous year. The reason the fourth quarter isnt used is because that number is typically not available from the U.S. Bureau of Labor Statistics until mid-January, and the SSA has to make its adjustment on January 1.

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Medicares Effect On Colas

Health care financing analyst Kristanna H. Peris reported in 2018 that Medicare and Social Security adjustments are measured by different indexes, which results in a faster rate of increase for Medicare premiums than for COLAs.

Congress added the hold-harmless provision to protect some beneficiaries monthly benefits from decreases linked to rising Medicare premiums. But the provision doesnt cover everyone and, depending on the number of people held harmless in a given year, those who are not held harmless could, according to Peris, bear the burden of meeting any resulting increase in premiums disproportionately.

Medicare premiums and out-of-pocket costs are expected to continue to use up a growing portion of retirees benefits.

How Is Cola Calculated

Social Security notices showing cost

The government calculates the Social Security COLA by comparing the average CPI-W for the third quarter of the year in which the most recent COLA became effective to the average CPI-W for the third quarter of the current year.

The percentage increase is the COLA, or the increase in Social Security benefits beginning in December. The 2021 cost-of-living adjustment, which began paying in January 2022, was 5.9%

According to the Social Security Administration, since 1982, COLAs have been effective with benefits payable for December .

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Reducing Cost Of Living Adjustment

At present, a retiree’s benefit is annually adjusted for inflation to reflect changes in the consumer price index. Some economists argue that the consumer price index overestimates price increases in the economy and therefore is not a suitable metric for adjusting benefits, while others argue that the CPI underestimates the effect of inflation on what retired people actually need to buy to live.

In 2003 economics researchers Hobijn and Lagakos estimated that the social security trust fund would run out of money in 40 years using CPI-W and in 35 years using CPI-E.

How Social Security Works

Social Security is an insurance program. Workers pay into the program, typically through payroll withholding where they work. Self-employed workers pay Social Security taxes when they file their federal tax returns.

Workers can earn up to four credits each year. In 2022, for every $1,510 earned, one credit is granted until $6,040, or four credits, has been achieved. That money goes into two Social Security trust fundsthe Old-Age and Survivors Insurance Trust Fund for retirees and the Disability Insurance Trust Fund for disability beneficiarieswhere it is used to pay benefits to people currently eligible for them. The money that is not spent remains in the trust funds.

A board of trustees oversees the financial operation of the two Social Security trust funds. Four of the six members are the secretaries of the departments of Treasury, Labor, and Health and Human Services, and the Commissioner of Social Security. The remaining two members are public representatives appointed by the president and confirmed by the Senate.

Medicare, the federal health insurance program for Americans 65 and older and some people with disabilities, is also supported through payroll withholding. That money goes into a third trust fund, which is managed by the Centers for Medicare & Medicaid Services .

Spouses and ex-spouses may also be eligible for benefits based on the earnings record of their partner or former partner.

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Total Benefits Paid By Year

Year

Workers in Social Security covered employment pay FICA or SECA taxes and earn quarters of coverage if earnings are above minimum amounts specified in the law. Workers with 40 quarters of coverage are “fully insured” and eligible for retirement benefits. Retirement benefit amounts depend upon the average of the person’s highest 35 years of “adjusted” or “indexed” earnings. A person’s payroll-taxable earnings from earlier years are adjusted for economy-wide wage growth, using the national average wage index , and then averaged. If the worker has fewer than 35 years of covered earnings these non-contributory years are assigned zero earnings. The sum of the highest 35 years of adjusted or indexed earnings divided by 420 produces a person’s Average Indexed Monthly Earnings or AIME.

The AIME is then used to calculate the Primary Insurance Amount or PIA. For workers who turn 62 in 2021, the PIA computation formula is:

90 percent of the first $996 of average indexed monthly earnings, plus

32 percent of average indexed monthly earnings between $996 and $6,002, plus

15 percent of average indexed monthly earnings over $6,002

Monthly benefit amounts are based on the PIA. Once the PIA is computed, it is indexed for price inflation over time. Thus, Social Security monthly benefit amounts retain their purchasing power throughout a person’s retirement years.

Kiss Your 101% Social Security Raise Goodbye In 2023

Social Security recipients may see cost-of-living boost in 2022

More than 48 million Americans received a retired worker benefit from Social Security in July. The vast majority of these recipients — 89%, according to an April survey from national pollster Gallup — are reliant on the program to make ends meet during retirement.

It’s a similar story for America’s huge labor force. When Gallup surveyed nonretirees earlier this year, a whopping 84% expected their Social Security benefit to be a “major” or “minor” source of income during their golden years.

The point being that Social Security is, or will be, an indispensable source of income for most Americans. That’s what makes the program’s annual cost-of-living adjustment announcement during the second week of October so important. This year’s announcement is slated for release on Oct. 13 at 8:30 a.m. ET.

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Social Security Cost Of Living Increase Could Be Largest In 40 Years

As inflation continues to rise, those living on Social Security benefits have been hit hard. They may be getting some relief in 2023, according to the latest Cost of Living Update from the Senior Citizens League.

, Social Security, and Medicare policy analyst for the SCL, said that the group estimates there will be a massive 8.7% cost of living increase in 2023. She said that would result in an extra $144.10 per month for beneficiaries.

That would be the largest increase since 1982, when the Social Security Administration increased benefits by 7.4%

Johnson noted that while inflation is slowing, it has still resulted in higher costs for everything from food to medicine.

“Across the board, retired and disabled Social Security recipients spend a bigger portion of their incomes on healthcare costs, housing, and food and less on gasoline. Over the past 12 months, they rank food costs as their fastest growing expenditure, housing, and transportation in that order,” Johnson wrote.

Johnson said that her estimate is based on the latest economic data released by the Labor Department. There is still one month left before the Social Security Administration announces the decision on 2023’s cost of living increase. The SCL expects that announcement to come on October 13, after the consumer price index data from September is released.

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