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Brett Arends’s ROI: Social Security’s COLA is no bonus


The Biden administration wants credit for the huge 2023 hike in Social Security benefits, announced Thursday, as well as the planned cut in Medicare Part B premiums.

“For the first time in over a decade, seniors’ Medicare premiums will decrease even as their Social Security checks increase,” said press secretary Karine Jean-Pierre in a statement on Wednesday. “This means that seniors will have a chance to get ahead of inflation, due to the rare combination of rising benefits and falling premiums. We will put more money in their pockets and provide them with a little extra breathing room.”


Well, the 2023 Social Security benefit hike is nothing more than a cost-of-living adjustment to try to keep up with inflation, not get ahead of it. The real terms “increase” in benefits is precisely zero.

Then there’s the problem that the COLA, like all Social Security COLAs, comes a year after prices went up in the stores. Social Security recipients will get an inflation adjustment in 2023 to reflect price rises in 2022.

Oh, and there’s also the awkward point that Medicare B premiums are only being cut next year because this year they were hiked by too much.

“The federal government collected too much for Part B premiums in 2022,” Mary Johnson, policy analyst at the Senior Citizens League lobby group, tells me. “The 2022 Part B premium increase of 14.5% was one of the highest in the history of Medicare.” The reason, she says, was to provide contingency funding for the new Alzheimer’s drug Aduhelm. But in the event Medicare spent much less on the drug than expected. So they are giving some of the money back.

But, yes, let’s thank Uncle Sam for giving us back some of our own money.

Actually the situation with the Social Security cost of living adjustment is slightly worse than that. Social Security beneficiaries next year will get less overall than inflation, as in every year since 1984, because a growing percentage of their benefits will be taxed. Individuals earning more than $25,000 a year, and joint filers earning more than $32,000, will have to pay taxes on some or most of their benefits. As much as 85% of your benefits can be taxed, an absolute cheat because your contributions to Social Security were already made with after-tax money.

Oh, and when they introduced these taxes in the 1980s they didn’t even index the thresholds to inflation. As a result, the taxes which once hit only about 10% of Social Security beneficiaries now hit about half.

Social Security’s own trustees admit that the higher the inflation, the better it helps the trust fund at the expense of the beneficiaries. That’s because FICA taxes go up in real time, while benefits only get adjusted a year in arrears. And then the benefits get double taxed.

Jean-Pierre added that “MAGA Republicans” in Congress “continue to threaten Social Security and Medicare,” although cynics would suggest pretty much everyone in Congress is threatening Social Security, either by their actions or their inactions.

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