Not many workers in the private sector ever get back-to-back yearly pay increases of 5.9% and 8.7%, but that's the scenario Social Security Income recipients are banking on for 2022 and 2023.
Yet, are those Cost of Living Adjustment (COLA) margins enough to offset inflation?
According to a national survey by The Motley Fool, 55% of retirees said the 2023 COLA should be higher. The National Council on Aging also called the 2023 increase "insufficient."
Inflation peaked at 9.1% in June, but has since softened somewhat. The annual inflation rate for the U.S. is 7.7% for the 12 months ending in October, according to the U.S. Labor Department.
Key Biscayne resident H. Frances Reaves, Esq., is an attorney specializing in senior-related matters and founded Parent Your Parents to assist seniors and their children, as well as helping the AARP generation find benefits and avoid scams.
"The issue with Social Security, and I've always felt strong about this, is that it's supposed to be a supplement and not a way to (solely) live on," she said. "A lot of seniors view it as an entitlement, and that it's supposed to keep them living in the lifestyle they've been accustomed to. But, it's a supplement. And, it's really not an entitlement because you pay into it."
The 8.7% hike amounts to a $146 average increase in monthly benefits for a retired worker on Social Security, beginning with the first check in January. The average SSI monthly check would increase from $1,681 to $1,827.
"Honestly, 8.7% was actually a little more than what I was expecting," Reaves said. "But $146 really isn't that much here on the Key ... that's a dinner out with only one drink. The Key lives in rarefied air. But, hey, that $146 can buy you a lot of stuff at Target."
CNET (The Massive Social Security Increase for 2023 Is Still Too Small) reported that, according to the nonprofit Senior Citizens League, the 2022 COLA of 5.9% fell short of inflation by 48% through August, meaning the average beneficiary was short changed $417 for those eight months.
Florida's minimum average salary of $11 (goes up incrementally to $15 by 2026) translates to $22,880 annually for a 40-hour worker.
Putting that in perspective, the average Social Security earner collects nearly $20,000 a year, just $4,000 above the national poverty line for a family unit of two people.
In contrast, the average rent for an (887 square-foot) apartment in Miami is $2,307, according to RentCafe, ranging from $964 in the Palmer Lake-Mia Station area to $3,314 in Brickell Key.
The 8.7% COLA hike will be the biggest increase since 1981, when it hit an all-time high of 11.2%.
"You have to keep up with inflation; we had a big boom," Reaves said. "When I go to the grocery store, prices are up all around. I've become the Queen of BOGOs (buy one, get one)."
Reaves said the Social Security portion that was withheld from each paycheck was, "in a good way," to force savings. "But you were supposed to do your own savings" along the way, she said.
"Do people who live on a fixed income need (the 8.7% hike)? Yes, they need it because they didn't plan on using (SSI) as a supplement," she said.
Retirees can claim the minimal SSI payment as early as age 62, or wait until full retirement age at approximately 66. "But, if you wait until you're 70, that's the most you can make," she said.
"It's not a whole lot, but if you're already working, it's a plus. But, we slow down the older we get," she added. "I can tell you, I know people (here) who are working in their 80s."
According to the report by CNET, the Social Security Administration reported in 2017 that less than 1 in 5 (19.6%) of those 65 and older relied on SSI for at least 90% of their income. However, in 2020, the National Institute for Retirement Security put that figure close to 40%. Now, a recent Senior Citizen League survey found that number to be closer to 54%.
"If it's (SSI) under $2,000 a month, you qualify for Medicaid, but that's only when you're sick," Reaves said. "The bigger issue is, have you done your estate planning; have you put your things in trusts and wills?"
She said, when it comes to the Social Security aspect, there has been a lot to learn.
"Our elders, and maybe more of the Baby Boomer generation, or generations prior, saw it as a supplement, and they (knew they needed) to save," Reaves said. "I think a lot of Baby Boomers (and post-Boomers) see Social Security as their go-to plan when they get old."