Retirees got the highest cost-of-living adjustment, or COLA, to their Social Security benefits in over four decades this year — but they aren’t expecting the increased government payments to go very far.
A recent survey by The Senior Citizens League, an advocacy group, revealed that despite the significant 8.7% COLA boost approved by the Social Security Administration last fall, older Americans say they still won’t have enough funds to keep up with inflation.
What the survey says
- More than 50% of folks polled said they didn't think this year’s COLA would keep pace with rising costs.
- Roughly half of respondents said their cost of living rose last year by more than the 8.7% COLA increase.
- Inflation from January 2022 to January 2023 cooled to 6.3% compared to the 8.2% recorded the previous year, according to the measurement used to calculate both the COLA and inflation. Still, the league says prices for everyday goods are breaking the bank for older people on a fixed income.
- About 51% of respondents reported concerns about paying more in taxes as a result of the 5.9% COLA increase they received in 2022. And that's not to mention the 1 in 5 who said they were worried they might have to pay taxes on Social Security benefits for the first time this year.
Why it’s important
- Current retirees haven't seen inflation this high since their pre-retirement days.
- What’s more, Social Security recipients can owe taxes on part of their benefits when their household income surpasses $25,000 for single filers or $32,000 for couples. More and more older taxpayers are having to pay Social Security taxes because, unlike tax brackets, the income limits that determine whether benefits get taxed have not been adjusted for inflation.
- The advocacy group says the $25,000 limit today would be about $73,000 and the $32,000 level would be about $93,200 if those income thresholds actually kept up with inflation since the Social Security tax was imposed in the 1980s.
Social Security recipients say even with the largest increase in 40 years, the COLA just isn't going to cut it when it comes to covering the current cost of living. Social Security taxes are also taking money out of their pockets because of income limits that haven't been updated since 1984.
Older adults can get free help on their taxes through the government's Tax Counseling for the Elderly program, which is directed at people age 60 and up. There's also AARP Foundation Tax-Aide, which assists "anyone, free of charge, with a special focus on taxpayers who are over 50 or have low to moderate income," per its website.