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US seniors will get an increase in their monthly benefits starting next month. But is it enough to meet their needs amid the rising costs?
US seniors and other Social Security beneficiaries will get a higher monthly payment next month thanks to an 8.7% yearly cost-of-living increase to help them deal with rising inflation.
The average monthly benefit for retirees in 2023 is projected to be $1,827. According to CNN, this is a jump of more than $140, thanks to the US Social Security hike, the biggest in more than 40 years.
The Social Security payments modification is based on August-October inflation, which was at 40-year peak levels. Although inflation has slowed since then, current levels are still rather high.
Mary Johnson, a policy analyst for Social Security and Medicare at the senior citizens' advocacy organization The Senior Citizens League, said she thinks the increase in payout is anticipated by many since goods remain expensive. However, it will still be a "huge challenge" to shop for groceries or eat around the holidays.
About 70 million individuals would benefit from the Social Security payments increase, which follows a 5.9% boost in 2022.
It is sometimes the only source of income for seniors, therefore many rely substantially on Social Security.
Social Security Administration data shows that 42% of elderly women and 37% of old men depend on monthly benefits for at least half of their revenue.
Benefits Fell Short in 2022
In 2022, it became increasingly difficult to stretch Social Security payouts due to record-high inflation.
A new study from The Senior Citizens League shows that even with the implementation of a 5.9% cost-of-living adjustment in January, the record-high annual Social Security payments was still insufficient.
According to the nonpartisan seniors' organization, the average monthly pension for retirees grew to $1,656.30 in 2022 from $1,564 in 2021.
However, the data showed that a larger rise was required every single month this year to keep up with inflationary pressures, per CNBC.
The study concluded that the typical retiree's payout was $42.35 per month, or 46%, short. This totaled $508.20 at the end of the year.
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The COLA that Social Security recipients get each year is calculated using the CPI-W, or the Consumer Price Index for Urban Wage Earners and Clerical Workers. The quarterly average of the index is compared to the corresponding quarterly average from the prior year to determine the yearly percentage change.
In October 2021, it was reported that benefits will rise by 5.9% in 2022, the largest yearly increase in 40 years.
Reforms in Retirement and Medicare
The recently enacted government budget package includes many retirement system modifications.
Required minimum distributions, or RMDs, from tax-deferred retirement funds, become mandatory for retirees beginning in the calendar year after their 73rd birthday, as per a Yahoo! Finance report.
Small companies may get a $500 tax credit under the new law if they meet the following criteria:
- Upon hiring a military spouse, the employer must make them eligible to participate in the retirement plan within two months.
- Employer matching contributions should be made available to these employees earlier than the two-year mark, and
- Assure that these employees are fully vested in all company contributions right away.
The new retirement package has several more minor adjustments, some of which benefit mainly the wealthiest Americans, that will take effect after 2023. This is a detailed explanation of the bill's provisions.
There will also be important medicare changes. Medicare Part B's premiums and deductibles are decreasing. Millions of seniors will see their Medicare costs decrease for the first time in almost a decade.
The premiums of Medicare Part B will fall by 3%, or $5.20 per month, to $164.90 in 2023 from 2022's $170.10 price. Medicare Part B pays for doctor visits and other outpatient services not supported by Medicare Part A.
Moreover, Medicare Part B recipients will have a lower yearly deductible of $226 in 2023, down from $233 in 2022.
The Inflation Reduction Act ensures that the monthly copayment for insulin for the 3.3 million Medicare Part D diabetic enrollees would remain at $35 in 2023.
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