Social Security Payments: Why COLA Raise Isn't Actually a Good News

The latest cost-of-living adjustment rate is 8.7% for Social Security benefits and Supplemental Security Income payments.

Social Security Administration noted that the benefits' increase of 8.7% starts in December 2022, but payables will be in January 2023.

The usual schedule of the SSI payment date will be on January 1, but since it falls on a holiday, SSI payments will be distributed by the end of December.

In October, it was reported that Social Security payments will go up by more than $140 per month on average in 2023.

More than 65 million Social Security beneficiaries will see their benefit checks increase in January, while over seven million SSI payments recipients will see the said increase in their payments by the end of December.

The early payments sound like good news to Social Security beneficiaries. However, there is a catch to the 8.7% COLA increase that will be applied to the benefits.

Social Security Benefits and COLA Raise

The huge increase in the Social Security payments could also prompt Social Security recipients into higher tax brackets, pushing about half of all households to pay taxes on their benefits.

Mary Johnson, an analyst for Senior Citizens League's Social Security and Medicare policy, said that the taxes "are burdensome with serious repercussions on how people access what they need," such as housing and food sources, which can affect their health.

For those with an income between $25,000 and $34,000 filing an individual tax return, tax brackets could reach as much as 50% of your benefits.

The percentage jumps to 85% if your income is more than $34,000. Meanwhile, those filing jointly with between $32,000 and $44,000 may have to pay up to 50% of benefits, jumping to 85% if joint income reaches more than $44,000.

Seniors are projected not to have extra retirement benefits despite the COLA raise. At best, they will be able to maintain the same purchasing power they always had.

In addition, surging inflation that led to the 8.7% COLA does not look promising for savers or for conservative investors.

Social Security Payments Increase

The SSA announced that retirees are seen to have an average monthly increase of $146, while a worker with disabilities' average monthly increase is $119.

Meanwhile, senior couples both receiving benefits will have an average monthly increase of $238, with widowers' benefits increasing to $137.

Widowers with two children will have an average monthly increase of $282.

Social Security benefits have been adjusted automatically each year since 1975 based on the inflation rate.

Managing director of financial planning at Charles Schwab, Rob Williams, said that the COLA increase is a significant "feature that keeps retirees from being tied to a fixed income" when it comes to their expenses.

Johnson also noted that the current COLA rate is "extremely rare" and it was the "highest ever received by most Social Security beneficiaries alive today."

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This article is owned by Latin Post.

Written by: Mary Webber

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