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Business

What to know as record 8.7% Social Security COLA goes into effect

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As inflation has kept prices high in 2022, Social Security beneficiaries may look forward to a record high cost-of-living adjustment in 2023.

“Your Social Security benefits will increase by 8.7% in 2023 because of a rise in cost of living,” the Social Security Administration states in the annual statements it is currently sending to beneficiaries.

The 8.7% increase will be the highest in 40 years. It is also a significant bump from the 5.9% cost-of-living increase beneficiaries saw in 2022.

The increase is “kind of a double-edged sword,” according to Jim Blair, a former Social Security administrator and co-founder and lead consultant at Premier Social Security Consulting, which educates consumer and financial advisors on the program’s benefits.

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“It’s good for people on Social Security,” Blair said. “It’s not so good for the economy with inflation.”

Social Security benefit checks will reflect the increase starting in January.

The average retiree benefit will go up by $146 per month, to $1,827 in 2023 from $1,681 in 2022, according to the Social Security Administration The average disability benefit will increase by $119 per month, to $1,483 in 2023 from $1,364 in 2022.

What’s more, standard Medicare Part B premiums will go down by about 3% next year to $164.90, a $5.20 decrease from 2022. Medicare Part B covers outpatient medical care including doctors’ visits.

Monthly Part B premium payments are often deducted directly from Social Security checks. Due to the lower 2023 premiums, beneficiaries are poised to see more of the 8.7% increase in their monthly Social Security checks.

“The good news about these letters is people are realizing 100% of the 8.7% lift,” said David Freitag, a financial planning consultant and Social Security expert at MassMutual.

“Of course, the economy is inflated at a frightful rate, but this represents the value of cost-of-living adjusted benefits from Social Security,” Freitag said.

Few other income streams in retirement offer cost-of-living adjustments, he noted.

What to look for in your Social Security statement

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If you’re wondering how much more you stand to see in your checks, the personalized letter from the Social Security Administration will give you a breakdown of what to expect.

That includes your new 2023 monthly benefit amount before deductions.

It will also tell you your 2023 monthly deduction for premiums for Medicare Part B, as well as Medicare Part D, which covers prescription drugs.

The statement will also show your deduction for voluntary tax withholding.

The good news about these letters is people are realizing 100% of the 8.7% lift.

David Freitag

financial planning consultant and Social Security expert at MassMutual

After those deductions, the statement shows how much will be deposited into your bank account in January.

Of note, you do not necessarily have to be receiving Social Security checks now to benefit from the record 2023 increase, Blair noted.

“The good news is you don’t have to apply for benefits to receive the cost-of-living adjustment,” Blair said. “You just have to be age 62 or older.”

When you may pay Medicare premium surcharges

If your income is above a certain amount, you may pay a surcharge called an income related monthly adjustment amount, or IRMAA, on Medicare Parts B and D.

This year, that will be determined by your 2021 tax returns, including your adjusted gross income and tax-exempt interest income. Those two amounts are added together to get your modified adjusted gross income, or MAGI.

In 2023, those IRMAA premium rates kick in if your modified adjusted gross income is $97,000.01 or higher and you filed your tax return as single, head of household, qualifying widow or widower or married filing separately; or $194,000.01 or higher if you are married and filed jointly.

Notably, just one dollar over could put you in a higher bracket.

“It’s important for everyone to make sure that the amount of adjusted gross income that they’re using for the IRMAA surcharges agrees with what they filed on their tax return two years ago,” Freitag said.

If the information does not match, you “absolutely need to file an appeal,” he said.

Because the IRMAA surcharges can be extremely significant, that is an area to watch for errors, Freitag said.

When to appeal your Medicare surcharges

If your income has gone down since your 2021 tax return, you can appeal your IRMAA.

That goes if you have been affected by a life changing event and your modified adjusted gross income has moved down a bracket or below the lowest amounts in the table.

Qualifying life changing events, according to the Social Security Administration, include marriage; divorce or annulment; death of a spouse; you or your spouse reduced your work hours or stopped working altogether; you or your spouse lost income on from property due to a disaster; you or your spouse experienced cessation, termination or reorganization of an employer’s pension plan; or you or your spouse received a settlement from an employer or former employer due to bankruptcy, closure or reorganization.

To report that change, beneficiaries need to fill out Form SSA-44 with appropriate documentation.

How higher benefits could cost you

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As your Social Security income goes up with the 8.7% COLA, that may also push your into a different IRMAA or tax bracket, Freitag noted.

That calls for careful monitoring of your income, he said.

Keep in mind that two years in the future you may get exposed to IRMAA issues if you’re not careful.

In addition, more of your Social Security benefits may be subject to income taxes. Up to 85% of Social Security income may be taxed based on a unique formula that also factors in other income.

It is a good idea to have taxes withheld from Social Security benefits in order to avoid a tax liability when you file your income tax returns, according to Marc Kiner, a CPA and co-founder of Premier Social Security Consulting.

“Do it as soon as you can,” Kiner said of filling out the voluntary withholding request form.

To better gauge how IRMAA or taxes on benefits may affect you going forward, it may help to consult a tax advisor or CPA who can help identify tax-efficient strategies, Freitag said.

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Business

Social Security COLA will be 8.7% in 2023, highest increase in 40 years

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Amid record high inflation, Social Security beneficiaries will get an 8.7% increase to their benefits in 2023, the highest increase in 40 years.

The Social Security Administration announced the change on Thursday. It will result in a benefit increase of more than $140 more per month on average starting in January.

The average Social Security retiree benefit will increase $146 per month, to $1,827 in 2023, from $1,681 in 2022.

The Senior Citizens League, a non-partisan senior group, had estimated last month that the COLA could be 8.7% next year. 

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The confirmed 8.7% bump to benefits tops the 5.9% increase beneficiaries saw in 2022, which at the time was the highest in four decades.

The last time the cost-of-living adjustment was higher was in 1981, when the increase was 11.2%.

Next year’s record increase comes as beneficiaries have struggled with increasing prices this year.

“The COLAs really are about people treading water; they’re not increases in benefits,” said Dan Adcock, director of government relations and policy at the National Committee to Preserve Social Security and Medicare.

“They’re more trying to provide inflation protection so that people can maintain their standard of living,” Adcock said.

How much your Social Security check may be

Beneficiaries can expect to see the 2023 COLA in their benefit checks starting in January.

But starting in December, you may be able to see notices online from the Social Security Administration that state just how much your checks will be next year.

Two factors — Medicare Part B premiums and taxes — may influence the size of your benefit checks.

The standard Medicare Part B premium will be $5.20 lower next year — to $164.90, down from $170.10. Those payments are often deducted directly from Social Security benefit checks.

“That will mean that beneficiaries will be able to keep pretty much all or most of their COLA increase,” Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, told CNBC.com this week.

That may vary if you have money withheld from your monthly checks for taxes.

To gauge just how much more money you may see next year, take your net Social Security benefit and add in your Medicare premium and multiply that by the 2023 COLA.

“That will give you a good idea what your raise will be,” said Joe Elsasser, an Omaha, Nebraska-based certified financial planner and founder and president of Covisum, a provider of Social Security claiming software.

How the COLA is tied to inflation

The COLA applies to about 70 million Social Security and Supplemental Security Income beneficiaries.

The change is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.

The Social Security Administration calculates the annual COLA by measuring the change in the CPI-W from the third quarter of the preceding year to the third quarter of the current year.

Benefits do not necessarily go up every year. While there was a record 5.8% increase in 2009, the following two years had 0% increases.

“For seniors, because they spend so much on health care, those years were difficult,” Adcock said.

A similar pattern may happen if the economy goes into a recession, according to Johnson.

What the COLA means if you haven’t claimed benefits yet

If you decide to claim Social Security benefits, you will get access to the record-high COLA.

But you will also have access to it if you wait to start your benefit checks at a later date, according to Elsasser.

If you’re 62 now and don’t claim, your benefit is adjusted by every COLA until you do.

The amount of the COLA really should not influence claiming.

Joe Elsasser

CFP and president of Covisum

What’s more, delaying benefits can increase the size of your monthly checks. Experts generally recommend most people wait as long as possible, until age 70, due to the fact that benefits increase 8% per year from your full retirement age (typically 66 or 67) to 70. To be sure, whether that strategy is ideal may vary based on other factors, such as your personal health situation and marital status.

“The amount of the COLA really should not influence claiming,” Elsasser said. “It doesn’t hurt you or help you as far as when you claim, because you’re going to get it either way.”

How a record-high increase may impact Social Security’s funds

Social Security’s trust funds can pay full benefits through 2035, the Social Security Board of Trustees said in June.

At that time, the program will be able to pay 80% of benefits, the board projects.

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The historic high COLA in 2023 could accelerate the depletion of the trust funds to at least one calendar year earlier, according to the Committee for a Responsible Federal Budget.

Higher wages may prompt workers to contribute more payroll taxes into the program, which may help offset that. In 2023, maximum taxable earnings will increase to $160,200, up from $147,000 this year.

What could happen to future benefit increases

While 2023 marks a record high COLA, beneficiaries should be prepared for future years where increases are not as high.

If inflation subsides, the size of COLAs will also go down.

Whether the CPI-W is the best measure for the annual increases is up for debate. Some tout the Consumer Price Index for the Elderly, or CPI-E, as a better measure for the costs seniors pay. Multiple Democratic congressional bills have called for changing the annual increases to that measure.

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Health

Long COVID Contributing to Disabilities by the Millions

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Interdisciplinary treatments aimed at both mind and body are needed for these complex conditions

From early 2021, stories have emerged of people experiencing post-COVID-19 symptoms that were so debilitating it impacted their ability to work and live a normal life.

Thirty-one-year-old Rebecca Meyer spoke on CNN in January 2021 about her 11-month struggle with long COVID symptoms for 11 months, having contracted symptoms from an infection.

Prior to infection, she was a healthy woman with no underlying health conditions. However, 11 months into the sickness, Meyer maintained that she was still “very much in the symptom-management phase of my sickness.”

Her bedroom looked like a pharmacy due to the many medications she had tried.

Speaking on her health, Meyer’s voice cracked with emotion; she needs a feeding tube due to gastroenteritis from her post-COVID symptoms, and is very much out of her four children’s lives. At the time, she reported that she has been reliant on her boyfriend, who lost his job due to the pandemic, to take care of her and the children.

“I was an active mom of four. And now I don’t get out of bed. I don’t eat, I don’t spend time with my children like I need to. This can happen to you,” she said.

Despite running over two years into the pandemic, there has been little progress on our understanding of long COVID symptoms and patients affected by it have remained largely neglected. Meanwhile, the debilitating conditions that many long COVID patients are suffering from have persisted, and are growing as a new group of disabled individuals.

Young and Disabled

While most clear out their COVID-19 symptoms in days to a few weeks, recent studies estimate that around 1 in 8 people who have been infected will have persistent COVID symptoms, despite testing negative for COVID-19.

Doctors still do not understand the drivers behind these symptoms, nor why these people are affected. Many long COVID patients, also known as long-haulers, are younger in demographic, and previously had no underlying health conditions.

However, many are hit with a myriad of mental and physiological conditions, including symptoms common to acute-COVID such as cough, fevers, shortness of breath, headaches, fatigue, and muscle aches, as well as less common COVID symptoms including brain fog, severe fatigue, chest pains, depression and anxiety, pins-and-needles, heart palpitations, sleep problems, along with other strange conditions.

Not all long COVID symptoms are debilitating, but for some, suffering from long COVID could mean a complete change to their lifestyle, and possibly even a disability.

The disabilities caused by long COVID-19 are directly related to critical organs including the brain, heart, lungs, and muscles.

1. Brain impairment: long COVID-19 impairs brain function and causes nerve damage. Studies have shown that more than 30 percent of SARS-CoV-2 viruses attack nerves. Nerves are a reservoir of hidden viruses, and nerves are connected to internal organs. Many “long-haulers” experience brain fog including difficulty sleeping, headaches, and dulled thinking and memory.

2. Impaired heart function: fatigue is a primary symptom in long haulers as well as muscle aches and increased fatigue after exercise. Many suffer from reduced cardiac output, meaning they have to reduce the intensity of their exercise and some cannot exercise without putting their health at risk.

3. Impaired respiratory function: studies have found that long COVID patients have decreased lung function due to scarring and inflammation. This can lead to decreased oxygen uptake and shortness of breath from lowered blood oxygen levels.

4. Impaired muscle function: persistent immune actions against viruses damage cells, including muscle cells and tissue. Inflammation from the immune responses can trigger inflammation in muscle fibers and induce muscle weakness.

5. Impaired blood vessel function: inflammation in the body damages cells that line blood vessels, and can possibly impair oxygen supply to organs and muscles. This can cause fatigue and aches.

A Global Problem

Disabilities from long COVID, and debilitating vaccine injuries (which often share similarities to long COVID symptoms) are growing, and becoming a problem of both national and global concern.

Debilitating long COVID symptoms can make it difficult for people to enjoy social activities and hold down a job.

News reports have emerged of people with long COVID and the vaccine injured who have faced discrimination from work and were later layovered due to their condition.

In July, 2021 the U.S. Department of Health and Human Services listed long COVID as a disability under Titles II (state and local government) and III (public accommodations) of the Americans with Disabilities Act (ADA). The statement cited that individuals claiming for long COVID disability will be assessed individually by health experts to determine if their health problems are from long COVD.

Latest U.S. government figures revealed a staggering 385,000 people have been living with symptoms of long COVID for a year or more.

A study by Brookings estimated that around 4.5 million Americans with long COVID are out of work.

This not only impacts the American workforce but is also a significant global problem both in matters of labor and healthcare.

Studies from the Netherlands showed that COVID-19 and long COVID has driven up sick leave during the pandemic. During the pandemic, the Organization for Economic Co-operation and Development published policies, encouraging implementation of sick leave income for people suffering from COVID-19 symptoms to protect their income, health, and jobs during the COVID-19 crisis.

While this provided temporary relief to the people who needed paid leave as a safety net, it also invariably increased government spending, with most countries coming out of the pandemic seeing unprecedented inflation rates.

Health conditions as a result of COVID-19 and related problems are also contributing to a shortfall in labor. Given that the world is already burdened with labor shortage from two years of pandemic, and rapidly changing work environment and career outlooks, disabilities from long COVID and vaccine injuries only add fuel to the fire.

A study published before the pandemic showed that, by 2030, more than 85 million jobs could go unfilled because there aren’t enough skilled people to take them, this number is expected to be significantly higher coming out of the pandemic.

The World Health Organization has also reported that more than 6.4 million deaths from COVID-19 and related problems. News reports have shown that there are many more vaccine injured and those who have declined vaccinations who have lost their jobs.

The expectation for work has also shifted during the pandemic. After two years of mostly working remotely with unstable employment and income, people coming out of lockdowns are also reporting mental health problems. Some came to the conclusion that work is not as important as their health or mental wellbeing and have since postponed seeking employment.

Interdisciplinary Approach to Treat Both Mind and Body

Considering that long COVID-19 is an interdisciplinary disease with a myriad of conditions that affect multiple organs, holistic health approaches have been encouraged by clinicians to treat the symptoms as a whole.

Dr. Sandrock, a professor of critical care and infectious disease medicine at the University of California, Davis School of Medicine, also said that the only universal treatment for “long-term symptoms of COVID-19” is to “improve the quality of life,” including adjusting sleep and reducing stress.

A few options of integrative care have emerged in scientific literature to resolve long COVID.

Psychological Therapies

Long COVID is detrimental to mental health. Patients often report symptoms that may be synonymous with depression and anxiety, including insomnia and muscle weakness.

Fatigue is a primary symptom of long COVID. For the patients in a state of social isolation, as well as financial and relationship difficulties, their situation can worsen fatigue, which can further cause negative impacts on mental health, and quality of life, forming a negative spiral.

People with long COVID are encouraged to seek out counseling and interact with support groups for people sharing similar conditions.

Acupuncture

Acupuncture is a holistic and energy-based medicinal practice based on the understanding that the body and its organs correspond to different energies.

Energy in excess or deficiency can affect particular organs, causing imbalances to the body. Therefore, by inserting very thin needles into acupoints at different meridians, energy balances can be restored at different organs.

Acupuncture has long been acknowledged as a medical practice that can alleviate symptoms of chronic pain.

Studies have shown that acupuncture increases the release of neurotransmitters including serotonin and noradrenaline. It also promotes the release of endorphins and melatonin and improves immune function.

The practice reasons that mental illnesses are due to imbalances in energies in various organs,

Studies have shown that acupuncture can improve mental conditions including depression and anxiety. Research indicates that depressive symptoms may be alleviated through the release of serotonin and noradrenaline, and electroencephalography readings show electroacupuncture (a form of acupuncture) may be just as effective as amitriptyline without the drug side effects.

In people with anxiety, acupuncture enhances a sense of stillness, general restfulness, and unresponsiveness to painful stimuli. It also boosts the release of endorphin, a hormone related to the feeling of happiness and satisfaction, as well as melatonin, a hormone that modulates the circadian rhythm and improves sleep.

Electroencephalography readings showed that acupuncture increased alpha waves, a wave associated with a normal wakeful state where the subject is quietly resting.

Studies have shown that acupuncture reduces patients’ needs for preoperative sedatives and the use of acupuncture comes with reduced side effects in comparison to prescription drugs for pain.

For long COVID symptoms, acupuncture is suggested to stimulate the central nervous system. Specifically it reduces the “fight or flight” stress response of the sympathetic nervous system while stimulating the parasympathetic responses (“rest and digest”).

Studies on long COVID patients suffering from chest palpitation and shortness of breath—symptoms synonymous with anxiety—found that patients experienced a decrease in the severity of the symptoms following acupuncture sessions.

Rehabilitation Interventions

Rehabilitations including physical, occupational, and speech therapy to help patients return to daily life.

Studies on aerobic and pulmonary physiotherapy, found that it improves patients’ shortness of breath, anxiety, and fear of moving. High and low-intensity aerobic exercises increased appendicular muscle mass as well as handgrip strength in patients with long COVID.

Rehabilitation and nutrition programs can also prevent and improve loss of muscle mass in patients.

Chiropractic Therapy

Chiropractic therapy is a holistic therapy that focuses on the musculoskeletal system, especially the spine. Chiropractors believe that vertebrae can become misaligned or move out of their normal position, creating subluxations that put pressure on the tissues around them.

This pressure can affect not only the immediate joints but also other visceral organs and the whole body. Therefore, chiropractors believe symptoms of stiffness, dizziness, lack of energy, general malaise, posture imbalance, neck and back stiffness or soreness, spine muscle spasms, constant headaches, and lessening of mobility are all signs of subluxation.

Vertebrae can be realigned through skeletal manipulation, which is when chiropractors apply a force to the area that is misaligned, and chiropractors use various techniques to manipulate relevant joints.

Primarily, chiropractic therapy has been used to treat back pain, however several studies have indicated that they can also treat pain in joints and limbs, muscle pain and tenderness, insomnia, headaches, and fatigue.

Meditation

Meditation, a mental exercise to attain greater spiritual awareness, is an umbrella term for various practices including yoga, taichi, breathing, and mindfulness exercises, and many more.

Meditation has been associated with many mental and physiological health benefits.

Studies have shown that meditation improves symptoms of depression, anxiety, as well as concentration, and focus.

Physically, meditation has been shown to reduce inflammation and strengthen the immune system. Studies in immune-compromised (HIV and cancer) patients showed that meditation increased or reduced the decline of immune cells, and also prevented immune aging.

Mindful meditation have been suggested to regulate and restore immune signaling. Studies showed that meditation improved interferon messaging. Interferons are dysregulated in people with severe COVID symptoms and have been suggested to also drive vaccine injury. Restoring a robust interferon pathway may improve the symptoms in people suffering from long COVID and in people sharing similar symptoms.

Meditation and mindful exercises have been encouraged during the pandemic and for long COVID patients to recover from fatigue and mental distress.

Even minimal meditation improves mental health, studies have shown novice meditators who listened to a 10 minute meditation tape before attention tests received a higher score than people who did not meditate beforehand.

Some meditation guides recommend beginners start with two to five minutes of meditation whenever they want to regulate stress and emotions. However, given that meditation could mean various practices, everyone can experiment with the duration and frequency to see what works best for them.

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Business

Tool shows how changes could affect you

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A Social Security Administration office in San Francisco.

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It’s no secret the funds Social Security uses to pay benefits are running low.

New proposals on Capitol Hill aim to fix the program’s solvency.

Just how dramatic those changes will need to be depends on how soon changes are put through.

Likewise, people who are planning for their retirement now may also want to make adjustments based on unforeseen events that could pop up down the line.

That includes any potential cuts to Social Security retirement benefits.

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“When you’re looking at all these ‘what ifs,’ the adjustments you make now in order to plan for something later are much smaller,” said Joe Elsasser, founder and president of Covisum, a Social Security claiming software company.

To that end, Covisum has developed a calculator to help both consumers and financial advisors gauge just how impactful any Social Security benefit cuts could be to their bottom line in retirement.

To be sure, benefit cuts are not a given.

One year ago on Thursday, the Social Security Administration released projections indicating its trust funds could become depleted in 2035, at which point 79% of promised benefits would be payable.

An official update is expected to be released soon with the agency’s annual trustees report. Meanwhile, other projections have already speculated that the expiration date could be sooner due to economic after effects of the Covid-19 pandemic.

To fix that shortfall, experts generally expect some changes. Benefit cuts are among the possibilities, as well as potential payroll tax increases, or a combination of both.

In 1983, when President Ronald Reagan ushered in the last major Social Security reform to fix the program’s then ailing finances, that included gradually raising the retirement age to 67 and imposing some taxes on benefits for the first time.

The key for anyone who is looking toward claiming Social Security retirement benefits now is not to base the decision on worries of what changes could be coming.

“The temptation may be to act on fear,” Elsasser said. “It’s rarely the best track for financial planning.”

“Having a realistic understanding of the impact, even in a bad case, is better than going in with your eyes closed,” he said.

Covisum’s new calculator helps advisors evaluate Social Security claiming decisions. For many people, that is the cornerstone of their retirement plan, Elsasser said.

The calculator can stress test clients’ plans against benefit cuts and other negative scenarios such as poor market performance or negative health situations to see if their plan would still be ok.

“If it is, then you don’t have to act on fear,” Elsasser said.

If it is not, then adjustments like reducing lifestyle expenses or working longer may be necessary.

There is also a free version of the calculator available to consumers.

That version requires four data points: year of birth, benefit amount at full retirement age, percentage of a hypothetical benefit cut and the year that cut occurs.

Then it compares results of a person’s lifespan in five-year increments based on how early they claim — from age 62 or as late as 70 — and how that would be impacted if benefit reductions are put in place or not.

Ultimately, the results can be a starting point for people to evaluate what the potential results could be, which will hopefully lead them to avoid claiming early — and therefore take reduced benefits for life — just because they are afraid of benefit cuts, Elsasser said.

Research indicates those cuts would likely be less than 25%, if they happen at all, he said.

Notably, the calculator does not factor in the idea that benefits could go to zero. Because current tax revenues still support the program, that’s a highly unlikely scenario, Elsasser said. Even younger generations should continue to see income from the program in the future.

“The likelihood of it going to zero is as close to zero as you can get,” Elsasser said.

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