What You Need To Know About Social Security for the Rest of the Year
Social Security typically only makes major changes at the start of every calendar year, but it pays to stay informed of potential changes throughout the year as well. For example, the annual cost-of-living adjustment (COLA) for Social Security benefits, which is a needed lifeline for many beneficiaries, is based on data received in the third quarter of 2022. Additionally, proposed date or payment changes are often discussed long before they are implemented, so it’s a good idea to keep your eyes open for these types of developments.
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The highly discussed insolvency of the Social Security Trust Fund is an ongoing political discussion, and progress can be made at any time regarding potential Social Security “fixes.” So, the bottom line is it’s always wise to look for potential Social Security changes as they hit the news.
Therefore, here are some of the most important things you need to know about Social Security for the rest of the year.
The New Cost-of-Living Adjustment
Probably the biggest Social Security-related topic of 2022 is how much the 2023 COLA is going to be. The COLA was first introduced in 1975 as an annual adjustment to Social Security general benefits in order to keep them on par with the pace of inflation. Without a COLA, Social Security benefits would rapidly devalue, eventually becoming essentially worthless.
That being said, the amount of the annual COLA is typically small. Over the past few decades, for example, the COLA rarely topped 3%, and in three of the last 12 years the COLA was actually 0%. However, with inflation on the rise in 2021, the COLA for January 2022 hit a whopping 5.9%, and the 2023 adjustment could be nearly twice as high. Some readings of the latest data suggest that the 2023 COLA could be 10.5%, or even higher.
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Although the new COLA won’t take effect until January 1, 2023, now is the time to be paying attention to market data to get an indication of what it may be. The Social Security Administration bases the COLA not on the widely quoted Consumer Price Index (CPI), but rather a close relative, the CPI-W. The COLA adjustment is based on the year-over-year change in the reading from July through September each year. The SSA will release the 2023 COLA adjustment in October 2022.
Social Security Payment Dates
Social Security payment dates are fixed and cannot be changed. The timing of your payments depends on a few different factors. For example, if you receive both Social Security and Supplemental Security Income (SSI) payments, your benefit will arrive on the third of every month. The same is true if you applied for Social Security benefits on or before April 30, 1997.
However, if you only receive Social Security benefits and you filed after April 30, 1997, your birth date determines when you’ll get your payments. If you were born on the 1st through the 10th of any month, you’ll get your benefits on the second Wednesday of every month. If you were born on the 11th through the 20th of any month, your benefits will arrive on the third Wednesday of the month. Those with birth dates on the 21st through the 31st have to wait until the fourth Wednesday of every month to receive their benefits.
Note that if your benefits are being paid out based on someone else’s Social Security record — such as your spouse — the timing of the payments is keyed to their date of birth, rather than your own.
Social Security Trust Fund Insolvency Legislation
Much of the news surrounding Social Security over the past few years has centered on the insolvency of the Social Security Trust Fund. While this isn’t good news, it isn’t quite as harrowing as the headlines might lead you to believe.
Yes, it’s true that the latest news reports show that the Social Security Trust Fund will be insolvent by 2034, and Congress does need to act to rectify this. But “insolvency” here doesn’t mean that all of Social Security will go bankrupt and there will be no more payments made.
Rather, it essentially means that the Social Security surplus from prior years will evaporate. As benefits are mostly paid by current workers, even if the Trust Fund runs out, benefits will continue to be paid at about 74% of current levels. So again, it’s not good news — but it’s a far cry from zero.
Nevertheless, as that 2034 date approaches, Congress is getting more and more serious about finding some type of solution. As this can directly affect your wallet as a beneficiary, it’s a good idea to keep tabs on any new developments.
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