Social Security payments set for big increase. What to know.
Tens of millions of older Americans are about to get what may be the biggest raise of their lifetimes
BY
On Thursday, the
Plenty of controversy accompanies the move, known as a cost-of-living adjustment or COLA. Critics say the data the government uses to set the increase doesn't reflect what older Americans are actually spending, and thus the inflation they're actually feeling. The increase is also one-size-fits all, which means beneficiaries get the same raise regardless of where they live or how big a nest egg they may have.
Here's a look at what's happening:
WHAT'S THE BIG DEAL?
The
WHAT DO BENEFICIARIES HAVE TO DO TO GET IT?
Nothing.
WILLTHIS BE THE BIGGEST INCREASE EVER?
No, but it's likely the heftiest in 40 years, which is longer than the vast majority of
WHEN WILLTHE BIGGER PAYMENTS BEGIN?
January. They're also permanent, and they compound. That means the following year's percentage increase, whatever it ends up being, will be on top of the new, larger payment beneficiaries get after this most recent raise.
WHAT'S THE TYPICAL INCREASE?
Since 2000, it's averaged 2.3 percent as inflation remained remarkably tame through all kinds of economic swings. During some of the toughest years in that stretch, the bigger worry for the economy was actually that inflation was running too low. Since the 2008 financial crisis, the
SO THE INCREASE IS TO MAKE UP FOR INFLATION?
That's the intent. As Americans have become painfully aware over the past year, each
HAS SOCIAL SECURITYALWAYS GIVEN SUCH INCREASES?
No. The first American to get a monthly retirement check from
HOW IS THE SIZE OFTHE INCREASE SET?
It's tied to a measure of inflation called the CPI-W index, which tracks what kinds of prices are being paid by urban wage earners and clerical workers. More specifically, the increase is based on how much the CPI-W increases from the summer of one year to the next.
HOW IS THE SIZE SET FOR SOCIAL SECURITY BENEFITS?
Through a complicated formula that takes into account several factors, including how much a worker made in their 35 highest-earning years. Generally, those who made more money and those who wait longer to start getting
WILL RICH PEOPLE GETTHE SAME BOOST IN SOCIAL SECURITY?
Yes. Everyone gets the same percentage increase, whether they have millions of dollars in retirement savings or are just scraping by.
IFTHE INCREASE IS BASED ON INFLATION IN URBAN AREAS,
Yes. "The COLA doesn't take into account where you live or your actual spending patterns," said
DO BIGGER PAYOUTS NOWMEAN SMALLER PAYOUTS IN THE FUTURE?
The expected increase is great news for every beneficiary and for the businesses around them that could see more in sales. But it also means the
WILLTHIS MAKE INFLATION WORSE?
It will put more cash in the hands of people who mostly really need it, and they're very likely to use it. That will feed more fuel into the economy, which could keep upward pressure on inflation.
SO EVERYTHING'S GOING TERRIBLY?
The risk of a recession seems to grow by the day, but many economists expect inflation to come down as interest- rate hikes take effect and supply chains continue to improve. Economists at
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