Whether it's the food you've been putting on the table, the gas you've been filling up your car with, or the utility bills that have been arriving steadily in the mail, chances are, just about every aspect of life has been costing you more since the start of 2022. In fact, inflation levels actually started picking up substantially during the latter part of 2021 -- so much so that seniors on Social Security saw their benefits increase by 5.9% at the start of the year.
Unfortunately, the rate of inflation has significantly outpaced 2022's Social Security cost-of-living adjustment (COLA). While inflation is definitely hurting consumers across the board, it's dealt a particularly harsh blow to seniors on a fixed income.
The good news, however, is that Social Security is expected to undergo a few key changes for 2023 that should be announced shortly. And two of those changes, in particular, could put seniors in a much stronger position to combat inflation.
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1. An even larger COLA than what seniors got in 2022
The 5.9% Social Security COLA seniors received at the start of 2022 was, at the time, their largest raise in decades. But next-year's COLA is looking like it will well surpass the 5.9% mark.
Earlier this year, some experts were calling for a COLA as high as 11%, based on earlier inflation readings. At this point, a COLA somewhere in the vicinity of 9% is more likely unless September's inflation data is really surprising. But all told, that higher COLA should make it easier for seniors to cope with inflated living costs.
It's also worth noting that for the first time in years, Medicare Part B premiums won't be increasing like they usually do. Since Medicare enrollees on Social Security have their premium costs deducted from their benefits directly, Medicare increases can eat away at COLAs. But since that's not happening in 2023, Social Security beneficiaries on Medicare get to keep their COLAs in full.
2. A higher earnings-test limit
The Social Security Administration allows seniors to work and collect benefits at the same time. Those who do so before reaching full retirement age (FRA), however, risk having some benefits withheld if their income exceeds the annual earnings-test limit.
This year, that limit is $19,560 for seniors not reaching FRA this year. For those who do reach FRA this year, it's $51,960.
Next year, the earnings-test limit is expected to increase. That should give seniors more leeway to earn money from a job without having their benefits impacted. And that, in turn, should make it easier for more Social Security recipients to manage their bills at a time when living costs are so high.
When will inflation levels start to drop?
That's the big question, isn't it? The Federal Reserve has been aggressively hiking interest rates in an effort to slow the pace of consumer spending. Once that happens, it should narrow the gap between supply and demand that's been causing inflation to soar.
We can't point to a specific point in time when inflation is expected to reach a more moderate level. But it's fair to say that we could see relief in that regard in 2023. All told, Social Security recipients who are struggling today because of inflation may find that their situation will improve nicely in the coming year.
