Social Security recipients expected to get big benefit boost

WASHINGTON (AP) Millions of Social Security recipients will learn soon just how high a boost theyll get in their benefits next year.

The increase to be announced Thursday, expected to be the largest in 40 years, is fueled by record high inflation and is meant to help cover the higher cost of food, fuel and other goods and services. How well it does that depends on inflation next year.

The boost in benefits will be coupled with a 3% drop in Medicare Part B premiums, meaning retirees will get the full impact of the jump in Social Security benefits.

The announcement comes just weeks before the midterm elections, and at a time when Democrats and Republicans are sparring about high prices now and how best to shore up the program financially in the future.

President Joe Biden has pledged to protect both Social Security and Medicare. Ill make them stronger, he said last month. And Ill lower your cost to be able to keep them.ADVERTISEMENT

White House press secretary Karine Jean-Pierre said in a statement Wednesday that the combination of a Social Security benefit boost and a decline in Medicare premiums will give seniors a chance to get ahead of inflation. We will put more money in their pockets and provide them with a little extra breathing room, she said.InflationAsian stocks fall ahead of US inflation updateWhite House aims to speed-up pace of building infrastructureSocial Security payments set for big increase. What to know.Saudis say US sought 1 month delay of OPEC+ production cuts

About 70 million people including retirees, disabled people and children receive Social Security benefits. This will be the biggest increase in benefits that baby boomers, those born between the years 1946 and 1964, have ever seen.

Willie Clark, 65, of Waukegan, Illinois, says his budget is real tight and the increase in his Social Security disability benefits could give him some breathing room to cover the cost of the household expenses hes been holding off on.

Still, he doubts how much of the extra money will end up in his pocket. His rent in an apartment building subsidized by the U.S. Department of Housing and Urban Development is based on his income, so he expects that will rise, too.

Social Security is financed by payroll taxes collected from workers and their employers. Each pays 6.2% on wages up to a cap, which is adjusted each year for inflation. The maximum amount of earnings subject to Social Security payroll taxes for 2023 is $155,100.ADVERTISEMENT

The financing setup dates to the 1930s, the brainchild of President Franklin D. Roosevelt, who believed a payroll tax would foster among average Americans a sense of ownership that would protect the program from political interference.

Next years higher payout, without an accompanying increase in Social Security contributions, could put additional pressure on a system thats facing a severe shortfall in coming years.

The annual Social Security and Medicare trustees report released in June says the programs trust fund will be unable to pay full benefits beginning in 2035.

If the trust fund is depleted, the government will be able to pay only 80% of scheduled benefits, the report said. Medicare will be able to pay 90% of total scheduled benefits if the fund is depleted.ADVERTISEMENT

In January, a Pew Research Center poll showed 57% of U.S. adults saying that taking steps to make the Social Security system financially sound was a top priority for the president and Congress to address this year. Securing Social Security got bipartisan support, with 56% of Democrats and 58% of Republicans calling it a top priority.

Some solutions for reforming Social Security have been proposed but none has moved forward in a sharply partisan Congress.

Earlier this year, Sen. Rick Scott, R-Fla., issued a detailed plan that would require Congress to come up with a proposal to adequately fund Social Security and Medicare or potentially phase them out.

Senate Minority Leader Mitch McConnell, R-Ky., publicly rebuked the plan and Biden has used Scotts proposal as a political bludgeon against Republicans ahead of midterm elections.

If Republicans in Congress have their way, seniors will pay more for prescription drugs and their Social Security benefits will never be secure, Jean-Pierre said.

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Claire Savage in Chicago contributed to this report.