Social Security recipients are getting a big raise — but also are falling further behind

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The grocery store, homeowner, and pharmacy take away what Social Security offers.

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In October, the Social Security Administration announced that recipients would receive a Increase in cost of living by 5.9%, That means the average recipient will receive an estimated $1,674 per month, the equivalent of $20,088 per year, starting with a January check.

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But weeks later, the Labor Department said the inflation rate—the cost of living index—jumped 6.8% for the 12 months ended November 30, the fastest inflation rate since 1982. Food, accommodation, all the basics, is shooting.

Mathematics is not difficult here. If you’re getting 5.9% more, but the cost of living is 6.8%, you’ve lost ground. That means millions of Americans are being squeezed.

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The danger here is that Social Security was designed to supplement income for retirees. In fact, it is the only source of income that many of them have. According to the Social Security Administration:

In an ideal world, retirement finance would be thought of as a three-legged stool: one leg represents pension income, the other personal savings and the third Social Security. But as the bullet points above show, it’s fantasyland for a lot of seniors.

On top of that, Social Security, which is paying more than it is paying now, is set to use up its reserve reserve fund by 2033. After that, the Social Security trustees say, they’ll be able to pay recipients only 76 cents on the dollar.

think about that. Inflation is increasing. The cost of living is not increasing. And, on the far horizon, huge cuts loom.

Absent action to shore up Social Security, why would it be forced to cut 24% in 2034? The most basic explanation is this: Baby boomers are retiring in large numbers, and there aren’t enough young taxpayers getting into the system to replace them.

At the first point, even before the pandemic, an estimated 10,000 baby boomers (born between 1946 and 1964) were leaving the workforce each day. Now, with gains from rising stock and house prices, others are joining them. Of these, people 62 or older are also eligible for Social Security (at a lower rate if claimed before full retirement age); The number of result recipients has increased.

On the second point, there are not enough young taxpayers getting into the system to pay for this new influx of recipients. US birth rate is now at a decade lowthe least, in fact, since the government started tracking, Also, immigration—a rich source of eager workers fueled by ideas, energy, and entrepreneurial visions since America’s inception—has fallen. For example, State Department data shows that legal immigration from overseas declined by 90% during the second half of 2020.

How to fix Social Security?

More people are applying for Social Security. There are not enough workers to pay Social Security taxes. something’s got to give. Thus: dire forecasts that payroll taxes will only be able to cover 76% of benefits come 2034.

“Congress must address this problem,” Alicia H. Munnell, director of the Center for Retirement Research at Boston College, told me. “It’s important that we maintain faith in Social Security and avoid these drastic cuts.”

Meanwhile, Mary Johnson, a Social Security and Medicare policy analyst for The Senior Citizens League, a Washington-based advocacy group, points out that shore up Social Security is not a partisan issue in Congress — or at least shouldn’t be.

“Congress may be divided, but the old constituents are not,” Johnson says. “A national survey we conducted found that survey participants, evenly divided among those identifying as Democrats, Republicans, and independents, agreed that Social Security should be sidelined.”

Of course, the main reason Social Security hasn’t been sidelined yet is because it involves doing something no politician wants to do: causing pain to voters. For example, lawmakers can remove the income limit subject to payroll taxes. The cap for 2022 will be $147,000. But raising it is a real tax increase; Good luck getting through Congress, especially as expected, Republicans take back the House next autumn.

Lawmakers can also raise the minimum eligibility age for Social Security, currently 62, or the eligibility age for full benefits, depending on the time you were currently born. But it is cutting into a real profit – again a pain that no politician is eager to impose on voters.

This is why Social Security and entitlement programs in general have been called the “third rail of American politics.” Nobody wants to touch them. And so the problem persists.

More on Social Security

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