Social Security recipients will soon receive a record increase in their benefits, with the first larger payment set being delivered to recipients this week.
The increase, known as a cost-of-living adjustment (COLA), is the largest since 1981, when recipients saw an 11.2% increase. The 8.7% increase this year raises the average monthly benefit by about $140 to $1,827 per month. That compares to the typical benefit of $1,681 in 2022.
Payments begin Wednesday for recipients born between the first and tenth of a month, according to the Social Security Administration. The second payment wave goes out on the second Wednesday of the month, followed by the third and final round on the fourth Wednesday of the month.
More than 66 million Americans who collect Social Security will receive the larger payments.
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The higher payments came in response to the hottest inflation in four decades: the prices paid by US consumers fluctuated between August and October around the highest point in four decades, the period in which the COLA is calculated.
“An 8.7% Social Security cost-of-living adjustment is rare — enjoy it now,” said Mary Johnson, a policy analyst with the Senior Citizens League. “This may be the first and possibly the last time beneficiaries will receive a COLA of this high value today.”
Still, the decades-high benefit increase isn’t always good news for recipients, according to Johnson.
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Higher Social Security benefits are a bit of a catch-22. They can reduce eligibility for low-income safety net programs such as food stamps and encourage people to higher tax brackets. Essentially, bigger payments don’t necessarily lead to more money in people’s wallets.
Benefits in 2022 rose 5.9%, representing an average monthly increase of $92 for retired Americans, bringing the total amount to $1,657, the Social Security Administration announced last year.
Rising inflation however, has already completely eroded the rise, with recipients losing 46% of their purchasing power — or about $508 — each month for the year, according to calculations from the Senior Citizens League.
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In addition, the unusually large COLA could push the Social Security insolvency date forward by depleting the funds more quickly.
The average monthly benefit would have to increase by $417.60 for retirees to maintain the same level of purchasing power as in 2000.