By Jack Phillips
Social Security payments are slated to increase in 2023 because of elevated inflation but that may, in turn, force them to pay taxes and reduce their ability to receive government benefits, an analyst said.
Mary Johnson, a policy analyst at the Senior Citizens League, told Fox News that Social Security recipients should see a 10.5 percent increase in payments starting next year, raising fixed income by $175.10 from $1,668 per month. That could put some seniors in a higher tax bracket, essentially giving them less money than before, Johnson said.
“There can be some very long-term effects to high inflation COLAs,” Johnson said, referring to cost-of-living adjustments. “It’s like a no-win situation.”
Higher monthly Social Security payments can also reduce senior citizens’ ability to obtain low-income programs such as the Supplemental Nutrition Assistance Program, or food stamps, Johnson told the outlet. They also might be disqualified from adjusted Medicare health and prescription drug benefits for low-income individuals, she told USA Today.
“These are income-based programs,” she said. “Most, if not all of them, are easily administered through the states. If we’re forecasting a COLA that’s close to 9 or 10 percent, yes of course that’s going to affect, not only your eligibility for low-income benefits, it’s going to for everyone else, for people who don’t get benefits.”
Earlier this month, the Bureau of Labor Statistics released a report saying the Consumer Price Index, a key inflation metric, increased by 9.1 percent in June over the previous year. That’s the fastest pace since November 1981.
“‘Because the income thresholds are not adjusted like ordinary tax brackets, these once-in-a-lifetime COLA increases could lead to permanently higher taxes for many retirees,” Johnson told USA Today.
There are “tens of thousands” of retirees, she added, who have never paid taxes on their Social Security benefits and might have to start doing so for their upcoming taxes due to the COLA increase.
“So, while a high COLA is better than no COLA at all, there are consequences that boosted Social Security income can have that affect overall financial security,” Johnson concluded.
Social Security recipients saw their benefits increase 5.9 percent in May 2022, representing the highest increase in decades, according to Johnson.
“Inflation has been so high and so much higher than the 5.9 percent COLA that people got, they have experienced a shortfall in their benefits,” Johnson told CNN at the time. “If people do not have adequate retirement savings or cash savings that they can easily get to, people are putting more on consumer credit cards,” she added.