Social Security benefits have been a major concern for those waiting to claim, with a poor outlook. The COLA increase for 2023 has also been of major interest.
The economy was expected to take a much bigger hit than it actually did amid the 2020 COVID-19 pandemic.
Thanks to a strong comeback, the long term outlook has improved.
While this is good news, it hasn’t improved by much.
In 2021, the original projection for the Old-Age and Survivors Insurance trust fund was expected to be depleted by 2034, according to Investopedia.
Now, it’s expected to make it one more year to 2035.
The reason funds will last one more year is dur to a strong economic recovery following the pandemic.
Once funds are depleted by 2035, 80% of benefits are expected to be paid out to recipients.
As the baby boomers exit the workforce and enter retirement, Social Security taxes are expected to drop.
The HI Trust Fund, which funds Medicare Part A, will last two years longer than expected until 2028.
After this, 90% of that will be paid.
Finally, the DI Trust Fund will last 75 more years, after it was expected to be depleted by 2057.
How do experts feel about these projections regarding Social Security benefit programs?
Andrew G. Biggs, a senior fellow at the American Enterprise Institute, a public policy think tank, shared his expert opinion with Market Watch.
First off, while the one year added to the projection sounds like great news, the COLA increase for 2023 needs to be taken into account.
The rate of inflation has already been over 8% for 2022, meaning there may be a historical increase again this year.
That would effectively further deplete Social Security trust funds.
Biggs shares that raising taxes and eliminating the Social Security wage cap could be the best solution.
For the year 2022 the wage cap sits at $147,000.
This means if you make $147,000 at any point in 2022, any money you make after that will no longer be taxed for Social Security.
This is part of the Social Security 2100 Act.
President Joe Biden has revised it, but that version will only add 5 years to the projection.
What will the 2023 COLA increase look like?
As inflation continues to remain high, it’s starting to look like there will be an even larger COLA increase for 2023.
This would give retirees even more money, but could impact the funding of the Social Security program.
The COLA increase for 2022 was 5.9%, one of the highest increases in recent history.
For 2023, it looks like it could be as high as 8% if inflation doesn’t slow.
The trustee report said the COLA increase could be around 3.8%, but that was based on data from January and February.
Inflation has only continued since then.
Samantha edits our personal finance and consumer news section. Have a question or lead? Send it to [email protected].