A new survey by The Senior Citizens League (TSCL) suggests that fifty-four percent of older consumers remain unconvinced that their 8.7 percent Social Security cost-of-living adjustment (COLA) will keep pace with rising costs this year. Roughly the same number of survey respondents report that their household costs in 2022 rose by more than the 8.7 percent COLA increased benefits.
January inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), the same index that’s used to calculate the COLA, has moderated to 6.3% from one year ago, but many prices remain stubbornly high. Will 2023 be the year that seniors catch up? Ninety-six percent of survey respondents do not think so. There are good reasons for that.
A new analysis by Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, indicates that during the three-year period from the start of the COVID-19 pandemic in 2020 through December 2022, Social Security benefits have fallen short of COLAs by about $1,054 on average. Johnson calculated how much benefits would have needed to increase each month from January 2020 to December 2022 to keep pace with actual inflation and compared it to the amount of the average COLA. The shortfall was prior to the deduction for Medicare Part B premiums.
Today’s retirees have never experienced this level of inflation, which hasn’t been seen in more than 40 years. The moderation of inflation just announced would shrink the shortfall, by only about $40.34 per month for January and February before the deduction for the monthly Medicare Part B premium which is $164.90.
Social Security recipients can owe taxes on a portion of their Social Security benefits when their “combined income” is greater than $25,000 (single filers) or $32,000 (couples filing jointly. A growing percentage of older taxpayers are hit with the tax on Social Security every year because the income thresholds subjecting benefits to taxation are fixed, unlike tax brackets which are adjusted for inflation. Had these income thresholds been adjusted since the tax on Social Security benefits became effective in 1984, the $25,000 level today would be about $73,000 and the $32,000 level would be about $93,200. About 51 percent of survey respondents worry they will pay more in taxes this year due to the 5.9 percent COLA received last year. About one in five worry they may be subject to a tax on their Social Security benefits for the first time this tax season.
Finally, 62 percent of survey respondents think Congress should enact legislation to protect Social Security and Medicare benefits from delays or automatic cuts due to failure to lift the debt limit or come to a federal budget agreement by the deadline.
Shannon Benton, Executive Director, The Senior Citizens League (TSCL)
Mary Johnson, Social Security and Medicare policy analyst, The Senior Citizens League (TSCL)