MILLIONS of Americans are in line to get their Cost Of Living Social Security payment to help fight rising costs amid inflation.
According to the , the cost-of-living adjustment (COLA) would climb up to around 8.6 percent.
The average benefit would increase by about $143 per month to $1,800, while the maximum benefit would increase by around $361 to $4,555.
Social Security benefits are determined by the yearly COLA, which is based on the consumer price index.
Those born between the first and 10th of the month should expect their first payout on June 8, which is the second Wednesday of the month.
Those having birthdays between the 11th and 20th of the month will receive payments on the third Wednesday of the month, while those with birthdays between the 21st and 31st will receive payments on the fourth Wednesday of the month.
Read our COLA 2022 increase live blog for the latest news and updates...
COLA could exceed nine percent due to inflation
Inflation might push the annual COLA for Social Security to 9 percent or more in 2023, a historically high rise that could leave recipients with less money, according to .
The Consumer Price Index (CPI) for March increased by 8.5 percent over the previous year, according to the US Department of Labor, the largest rise since the year ending in December 1981.
What are Social Security benefits based on?
The product of the COLA and the benefit amount raises a person’s Social Security retirement payment by about the same amount as the COLA, according to the .
The accurate calculation, on the other hand, is more difficult.
A primary insurance amount, or PIA, is used to calculate each Social Security payout.
Through a benefit formula, the PIA is directly tied to the principal beneficiary’s wages.
The COLA increases the PIA, with the result being shortened to the next lower dime.
COLA notice arrives in mail yearly
COLA notifications are mailed during the month of December.
The to not reach out to them about the COLA adjustment when the time comes.
You may not need to wait for your postal notification to find out your new benefit amount for 2022 as you may see your COLA notice online through your own mySocialSecurity account.
Colorado rebate, continued
To qualify for the payments, you must be a “full-time” Colorado resident.
They will be based on 2021 tax returns, which must be filed by May 31, 2022.
Eligible taxpayers can expect to receive their checks in the mail in August or September, according to the state.
It’s unclear if they will go out in multiple batches.
Additionally, Colorado is set to implement universal pre-school, which would save families an average of $4,300 annually.
Colorado tax rebate to fight inflation
They will be worth $400 for individuals and $800 for joint filers.
The rebates aim to offset inflation, which has taken a toll on many Americans’ wallets.
While the latest inflation figure for April peaked at 8.3 percent, that number is still high.
Federal taxes on SS
Although many states do not require you to pay tax on your Social Security benefits – you may have to on the federal level.
This could depend on your provisional income, which includes adjusted gross income (AGI) combined with any non-taxable interest plus half of your Social Security benefits.
If provisional income exceeds $25,000, or $32,000 for married couples, you may be subject to taxes on up to 50 percent of your benefits.
Individuals with a provisional income of more than $34,000 and married couples with more than $44,000 could be subject to paying taxes on up to 85 percent of benefits.
Which states tax SS?
Along with New Mexico, if you live in one of the following states, you might be subject to state taxes depending on your income:
- New Mexico
- Rhode Island
- West Virginia
No state tax on Social Security, continued
In the past, individuals earning up to $25,000 and couples making up to $32,000 were exempt from paying taxes on their benefits.
New Mexico has given a deduction to those paying taxes on their Social Security benefits.
No state tax on Social Security
Couples earning less than $150,000 also won’t need to pay taxes on their retirement checks either.
Fred Nathan Jr., founder and executive director of Think Mexico, told that the tax relief will let 115,000 seniors earn $710 more on average annually.
Inflation’s effects on retirees’ pension
The money that retirees get from their pensions is being eroded by inflation, according to , and many pension plans provide participants with a cost-of-living adjustment on a regular basis.
However, these increases are minor in comparison to the 8.5 percent annual inflation rate recorded in March.
Some pension schemes, particularly business pensions, do not include any COLA.
As a result, retirees who rely on pension income are losing buying power, but those who rely on other sources of income, such as Social Security, see their benefits maintain up with inflation.
Extra $143 in Social Security checks?
The average Social Security income in 2022 will be $1,657, with the highest payout of $4,194 per month.
While the estimate isn’t considerable compared to last month, it’s possible that things may change soon, since the Social Security Administration (SSA) usually publishes the COLA for the next year in the autumn.
Possible 8.3 percent COLA in 2023
According to April statistics issued on May 11, the Consumer Price Index for All Urban Consumers, or CPI-U, 8.3 percent over the previous 12 months, remaining near 40-year highs, per .
Meanwhile, the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which the Social Security Administration uses to compute cost-of-living adjustments each year, climbed by 8.9 percent in the prior year.
According to The Senior Citizens League, based on April data, this indicates an 8.6 percent cost-of-living adjustment for 2023.
This is lower than the group’s previous projection of an 8.9% COLA based on March CPI data. The CPI-W had climbed 9.4 percent in the previous year at the time.
Boosting your SS benefits, continued
For each month from your full retirement age until age 70 that you postpone filing for benefits, the Social Security Administration increases your eventual benefit by about two-thirds of one percent – a total of eight percent for each year you wait.
That means retirees who reach full retirement age at 67 but delay claiming until 70 will get an extra 24 percent of their monthly benefit.
If the average benefit is $1,500, your check could now be reduced to $1,050 if you retire at 62.
If you wait until 70, that check will be around $1,888, assuming average benefit and eight percent year-over-year accrual beginning at full retirement age.
How to boost your SS benefits
The best way to boost your SS benefits is by holding off on filing until you reach the full retirement age of 70.
Depending on your benefit amount and at which age you decide to begin distributions, you could almost double the benefits you receive each month.
Delaying your retirement credits is a financial reward when collecting SS benefits.
What is COLA?
The COLA, or cost-of-living adjustment, is intended to offset recent inflation, and a formula is followed to determine how much the amount increases or decreases each year.
Each year, the COLA calculation is based on data from the third quarter of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
If the CPI-W drops or stays the same, Social Security claimants generally do not receive a COLA.
But with the Bureau of Labor confirming a 5.4 percent price increase for the 12-month period that ended in September, Social Security and SSI recipients will see the 5.9 percent rise in COLA in 2022.
Are Medicare costs and COLA aligned?
The Congressional Research Service projects Medicare Part B premiums will spike from $148.50 to $157.70 per month.
According to the , healthcare costs and housing costs have gotten 145 percent and 118 percent more expensive, while COLA’s have increased Social Security checks by just 55 percent since 2000.
How early retirement impacts COLA
If you choose to claim benefits before your full retirement age, you may receive less.
Waiting until full retirement age, which varies between 66 years and two months to 67 depending on when you were born, will give you a higher monthly payment.
Delaying your claim until age 70 will also help you receive maximum benefits.
If you have not worked or do not have enough Social Security credits to qualify for your own Social Security benefits, you may be able to receive spousal benefits.
The spouse of a retired worker can receive up to half of their spouse’s benefits.
To qualify for spouse’s benefits, you must be either at least 62 years of age or any age and caring for a child entitled to receive benefits on your spouse’s record and who is younger than age 16 or disabled.
If you choose to begin receiving your spouse’s benefits before you reach full retirement age, your benefit amount will be permanently reduced.
The spousal benefit continues until one spouse dies, after which the survivor may be eligible for survivor benefits.
Benefits for children
A child with a disability age 18 or older may get Social Security benefits when a parent gets retirement or disability benefits.
The child’s disability must have begun before age 22.
Dependent child benefits begin when a retired worker’s benefits start. They end when the child turns 18.
The disabled person may qualify for continuing benefits as an adult who is unable to work.
Benefits paid for your child will not decrease your retirement benefits.
The child may also get benefits if a parent dies.
The Social Security Disability Insurance (SSDI) program pays benefits to you and your family if you worked long enough and recently enough.
You must have paid Social Security taxes on your earnings before becoming disabled.
You must also meet certain requirements defined by the SSA, including a disability that has lasted or is expected to last at least one year or result in death.
The benefit is for life unless the SSA feels you no longer qualify.
When you die, members of your family could be eligible for benefits based on your earnings.
You and your children also may be able to get benefits if your deceased spouse or former spouse worked long enough under Social Security.
A widow or widower can receive benefits if they are age 60 or older.
They can start receiving your benefits if they are age 50 or older and disabled.
They can also receive your benefits at any age if they are caring for a child of the deceased who is younger than 16 and disabled.
Also, a one-time payment of $255 can be made only to a spouse or child if they meet certain requirements.
Survivors must apply for this payment within two years of the date of death.
The age you begin receiving retirement benefits affects how much your monthly benefits will be.
You can begin getting Social Security retirement benefits as early as age 62, but claiming them that early will reduce your benefits by as much as 30 percent.
If you wait until (66 for most people), you will get full benefits.
You also can wait until age 70 to start your benefits. The SSA will increase your benefit because you earned “delayed retirement credits.”
The retirement benefits are then paid out until you die.
Is it likely that benefits will end?
If you intend to rely on the program in 2035, keep in mind that you may get less in Social Security payments than you anticipated, reported.
According to the board of trustees’ annual report for 2021, if no modifications are made to address the trust fund shortfall, payouts will have to be cut by 22 percent.
For many retirees, such a reduction in benefits would be a significant financial blow.
Yahoo reports that 50 percent of senior married couples and 70 percent of elderly single persons rely on Social Security for at least half of their income.
The future of Social Security
According to the Social Security Board of Trustees’ 2021 annual report, the agency’s financial reserves will be drained by 2034, a year sooner than its 2020 report predicted, reports.
After then, annual taxes are estimated to pay just around 78 percent of the benefits.
Longer life expectancies, a smaller working-age population, and an increase in the number of retirees are all contributing to the problem.
By 2035, the number of people aged 65 and more in the United States will have risen to more than 78million, up from around 56 million now.
As a result, more individuals will be withdrawing money from the Social Security system, while fewer will be contributing.
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.”