Social Security raised to 40-year high, still 'drop in the bucket'

Social Security checks will increase by $140 on average come January.

Thursday, the Social Security Administration announced an 8.7% cost-of-living adjustment will start with benefits payable to more than 65 million Social Security beneficiaries. That will begin in January and take payments up to an estimated $1,827 monthly. The estimated 7 million who receive Supplemental Security Income will see increased payments beginning Dec. 30.

Mark Grywacheski with the Quad Cities Investment Group said the government typically looks at the level of inflation when deciding when to increase Social Security. But, while the increase may sound like great news, Grywacheski warns it may be too good to be true.

"Even though this 8.7% increase equates to about $140 a month, because it is subject to taxation, it's still not keeping up with many aspects of inflation," he said.

Now, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase from $147,000 to $160,200.

Inflation tends to come in cycles, he said. This cycle, inflation is costing the average American family an additional $433 per month-three times the amount Social Security is being increased by. In the past, consumers fight inflation by being selective about their purchases. The Hallmark of this inflation cycle is the impact on everyday necessities like food, housing, gas and clothing.

"The problem this creates is that it limits your ability to navigate this inflation," he said.

In the last 12 months, food prices have increased 11%, housing 8%, clothing 5.5%, gas 18.2% and natural gas is up by 33%. Energy companies are sending warnings to customers that prices will skyrocket this winter. In Illinois, the average bill is expected to increase by 25%.

"It's good, but it's kind of a drop in the bucket of what's needed," he said.

Additionally, Acting commissioner Kilolo Kijakazi said medicare premiums will fall while the benefits increase in 2023. The Centers for Medicare and Medicaid services made this announcement at the end of September.

Starting in 2023, the standard monthly premium for Medicare Part B enrollees will be $164.90, a decrease of $5.20 from 2022. The annual deductible for all Medicare Part B beneficiaries will be $226, down $7 from the year before. Open enrollment begins Saturday.

"This year's substantial Social Security cost-of-living adjustment is the first time in over a decade that Medicare premiums are not rising and shows that we can provide more support to older Americans who count on the benefits they have earned," said Kijakazi.

Grywacheski said those on a fixed income are typically hit harder by inflation. Lowering the medicare costs is an assist many need right now.

"Health care costs are a significant expense of the average American household, and even more so for the elderly," he said. "If those costs go down, that's a benefit to everyone."

Beneficiaries will be notified by mail beginning in early December about their new benefit amount or it can be found online at www.ssa.gov/myaccount.