In January 1990, Random House published the last book that was written and illustrated by Dr. Seuss during his lifetime. Oh, the Places You’ll Go! follows the life journey of a young boy throughout his challenges and successes. One of the most famous passages from the book is:
Source: WordPress.com (You may also remember this from the framed print in our office)
According to a number of nonprofit organizations that track data for senior citizens, Social Security could be joining the young boy in the story by soaring to high heights. The federal government has a September 30th fiscal year end. With June‘s recent inflation report, we now have nine of the twelve data points that will be used to calculate next year’s cost-of-living adjustment.
The Senior Citizens League forecasts the increase, which will take effect in calendar year 2023, to be 9.8%. Other organizations such as the Committee for Responsible Federal Budget (CRFB) is projecting an even higher double-digit increase. That would make it the highest cost of living adjustment, since Social Security rose 11.2% in 1981. I have included a chart below of all the historical Social Security increases since 1975. Prior to that time, benefit increases were set by legislation.
In 2022, Social Security recipients got a 5.9% cost-of-living increase. However, much of that increase has been eaten up by higher grocery, gasoline, and utility costs. It was also accompanied by a 14.5% increase in Medicare part B premiums. One of the largest in history.
In what could be an additional benefit for retirees, the Department of Health and Human Services, HHS, put out a statement on May 27th stating there was an overestimate of cost for a new Alzheimer’s drug that was first allowed by Medicare this year. HHS Secretary Xavier Becerra stated that a reduction in premium costs will be incorporated into Medicare premiums for 2023.
It is uncertain whether this means there will be a rate reduction, or simply a lower-than-expected increase. In any event, this should put a cap on any increase to Medicare part B premiums, leaving more of this significant increase in Social Security benefits in retiree’s pockets.
I plan to write further about the recently released Social Security Trustees Report. There are several data points that require further exploration. There are also significant demographic challenges that we will face in the future if we plan to continue funding this cornerstone retirement income benefit for future generations.
Even though Social Security could be soaring to high heights, we know that many of our clients are telling us that they are having to make difficult spending decisions based on the cost of goods and services used in everyday life. A significant increase in Social Security next year, without a significant corresponding increase to Medicare part B, should help our clients have additional resources to be off to great places…
We will continue to keep you informed about Social Security and Medicare benefits and funding levels. It is extremely important for most of our clients as they look forward to confidently transitioning from work life to a retirement of significance. As always, if you, or someone you know, have questions about your unique situation, please reach out to the CFP’s of Impel Wealth. We are here to help! This is part of our commitment to you as we continue “Moving Life Forward”.
© 2022 Jesse Hurst