Social Security recipients will soon begin receiving a record increase in their benefits, with the first larger payment due to recipients this week.
The increase, known as the cost of living adjustment (COLA), is the largest since 1981, when recipients saw an 11.2% jump. This year’s 8.7% increase will increase the average monthly benefit by approximately $140 to $1,827 per month. This compares to the typical benefit of $1,681 in 2022.
Payments are expected to begin Wednesday for recipients born between the 1st and 10th of a month, according to the Social Security Administration. The second wave of payments will be made 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 collecting Social Security will receive the largest payments.
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The higher payouts came in response to the hottest inflation in four decades: Prices paid by U.S. consumers hovered around a four-decade high from August to October, the period over which the COLA is calculated.
“An 8.7% Social Security cost-of-living adjustment is rare — take advantage of it now,” said Mary Johnson, policy analyst at the Senior Citizens League. “This may be the first and possibly the last time beneficiaries will receive such a high COLA today.”
Still, increasing benefits for decades isn’t always good news for recipients, according to Johnson.
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Higher Social Security payments are a bit of a catch-22. They can reduce eligibility for low-income safety net programs like food stamps and can cause people to higher tax brackets. Bigger payouts, essentially, don’t necessarily mean more money in people’s pockets.
Benefits in 2022 jumped 5.9%, equivalent to an average monthly increase of $92 for American retirees, bringing the total amount to $1,657, the Social Security Administration announced last year.
Rampant inflation has already eroded the entire increase, however, with recipients losing 46% of their purchasing power – or about $508 – each month of the year, according to calculations by the Senior Citizens League.
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Additionally, the unusually large COLA could advance Social Security’s insolvency date by depleting 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.