The announcement of the final Social Security COLA figure for 2023 has been big news in the United States. Still, there are many seniors who don’t quite agree with this increase. It may be insufficient for a large group of people for a variety of reasons. It is not possible to determine with a Social Security increase whether or not all retirees will be advantaged, as each case is completely individual. However, it can be determined that seniors with the lowest benefits will have the worst news.
Even though the COLA increase is record-breaking, being the largest in 40 years, it does not appear to be enough. One has to look closely at all the details to reach this conclusion. Social Security pensioners live mostly on this source of income alone. For that reason, such a large increase is still insufficient for many of them. But we have to look at why and determine what those exact reasons are in order to better understand the situation.
Once we understand what are the reasons why many retirees could lose purchasing power despite the increase in Social Security through the COLA, everything will become clearer. There are several reasons that point the way. Some are more obvious than others, but what we cannot deny is that there is an obvious problem with seniors and their benefits.
Financial problems with Social Security for seniors
The first thing to keep in mind when looking for financial problems among Social Security beneficiaries is inflation. The COLA is applied for inflation, but it is not fully adjusted. The inflation that is taken into account to do this is that corresponding to the third quarter of the year. This causes the subsidy to increase, but it does so based on the previous year. Thus, the increase for 2023 is made from the inflation of 2022. In the middle of next year we will see another increase that retirees may not be able to cope with.
This, together with day-to-day expenses, is key to understand why the situation is so bad. Also adding to the situation are medical expenses. While Medicare Part B Premium has seen a reduction for next year, it may not be enough. Remember that this Social Security expense is taken directly out of the monthly check.
Finally, one point to keep in mind is also taxes. There are many seniors who will have to pay taxes that they did not pay before. This translates into loss of purchasing power on the part of retirees and people with disabilities who have a Social Security benefit.