While the 2023 federal retiree cost-of-living adjustment (COLA) increase was the largest in nearly four decades, a new survey suggests that American retirees are worried that the COLA is not enough to cover rising costs this year.
The 2023 Social Security COLA — announced last October — was 8.7 percent. Federal retirees under the Civil Service Retirement System (CSRS) received the full 8.7%, and those under the Federal Employees Retirement System (FERS)) received 7.7%
READ: Guide to Federal Retiree COLAs: What Are They and How Are They Calculated?
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 will keep pace with inflation this year.
About 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,
While inflation has moderated to 6.3% from one year ago, many prices remain high. According to the survey, Ninety-six percent of seniors do not think they will catch up to rising costs this year.
SEE: 2024 Federal Retiree COLA Watch
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.
The moderation of inflation announced for January 2023 would shrink the shortfall, but only by about $40.34 per month for January and February before the deduction for the monthly Medicare Part B premium which is $164.90, according to TCSL.
“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), TCSL said. “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.”
The survey indicated also that 62 percent of seniors 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.