Biden will give around 70M retirees a 5.9% boost in Social Security payments in the biggest cost of living adjustment in 39 years - to keep up with rampant inflation under his administration
Millions of retirees will see a significant boost to their Social Security checks next year after the Social Security Administration (SSA) gave its cost of living adjustment (COLA) the most significant boost in nearly 40 years to keep up with rising inflation.
Social Security checks will raise 5.9%, about $92 for the average retired worker, in a shocking display of inflation. For the last 10 years, an inflation lull has led to checks that rise only 1.65% per year on average.
The SSA has not raised benefits so drastically year-over-year since 1982.
A typical retired worker will now receive $1,657 a month starting next year while a typical couple's benefits will rise $157 to $2,753 per month.
To account for the added cost to taxpayers, the Social Security tax will be applied to earnings up to $147,000 in 2022, up from $142,800 this year.
That means a bigger bill for 12 million high-earning workers, according to Forbes. The maximum Social Security tax per worker will be will be $18,228, where a maximum $9,114 could be taken out of a worker's paycheck. Employers would be responsible for the other half.
The US government expects to pay $1 trillion in Social Security benefits in 2021.
The COLA affects nearly 1 in 5 Americans, 70 million people in total, including Social Security recipients, disabled veterans and federal retirees. About half of seniors live in a household where Social Security accounts for at least half of their income, and one-fourth say they rely on the checks for nearly all of their income.
At the same time, the Medicare Part B premium is expected to rise from $148 per month by about $10.
Prices across the US have risen at the fastest rate in nearly a decade as federal stimulus has pumped trillions into the economy to increase consumer demand at a time when the supply chain for common household goods has been severely disrupted by the pandemic.
The consumer price index rose 5.4 percent in September from a year ago, up slightly from August's gain of 5.3 percent, matching the increases in June and July and keeping prices at a 13-year high.
The dramatic burst of inflation this year reflects sharply higher prices for food and energy, but also new and used cars, hotel rooms, airplane tickets and furniture, among other goods and services.
COVID-19 has shut down factories in Asia and slowed U.S. port operations, leaving container ships anchored at sea and consumers and businesses paying more for goods that don't arrive for months.
'Biden’s policy agenda, from tariffs and other potential tax increases to open antagonism of the oil and gas sector, is being priced-in by markets. It’s no secret that companies pass on costs to consumers through price increases,' Patrick Hedger with the Taxpayers Protection Alliance told DailyMail.com.
'Markets are also pricing-in trillions of stimulus spending and the prospect of another $5 trillion or so in “infrastructure” spending and taxes. Inflation is predominantly a psychological phenomenon. If policies match all the things people will expect to drive inflation, prices will rise accordingly,' he continued.
Higher prices are also outstripping the pay gains many workers are able to obtain from businesses, who have to pay more to attract employees.
Average hourly wages rose 4.6 percent in September from a year earlier, a healthy increase, but not enough to keep up with inflation.
Federal Reserve Chairman Jay Powell and Treasury Secretary Janet Yellen have assured that inflation is only temporary, but declined to say when it will slow down.
Asked if seniors will feel more well-off with the increase, Marc Goldwein, budget expert at the Committee for a Responsible Federal Budget, told DailyMail.com: 'That depends what happens with inflation over the course of next year.'
'I think that relative to the price rises seniors have seen so far, I think they're going to be better off.'
'A typical senior has seen their day-to-day prices go up more like 4% and they're going to get a 6% boost for a typical senior this is actually going to make them better off. That’s not the goal the goal of the COLA, the goal is to leave them exactly the same off, but it's not perfect.'
President Biden is meeting with supply chain officials and stakeholders on Wednesday afternoon and will deliver remarks on the market squeeze after that. Transportation Sec. Pete Buttigieg and National Economic Council Director Brian Deese will also host a roundtable with union representatives, CEOs from companies like Target, Home Deport, Samsung and Fedex and other industry representatives.
Social Security is already doling out more money to retirees than it is taking in in payroll taxes, a problem made worse by the coronavirus pandemic taking tens of millions of people out of the workforce.
Improvements in life expectancy and declining fertility rates have led to an aging population in the US, sure to strain the nation's social safety net for the elderly.
Social Security is due to run out of money in its trust fund by 2033, at which point it will only be able to hand out the funds it earns from workers - roughly 76% of benefits.
In 1935, the year the program started, there were about 150 workers for every retiree. Today, there are only 2.7, according to the SSA. That number is only expected to drop over the next 15 years.
Goldwein predicted the new boost in payments could make Social Security insolvent one year earlier, by 2032.
'Increasingly, however, retirees are those who have seen the writing on the wall about our nation’s looming entitlement crisis, so they’ve prepared to not have to rely on Social Security,' Hedger added, as he made the case for a new privatized retirement system.
'With the returns we’ve seen in the stock market over the past few decades, its inexcusable to continue to run the system like this and not shift Americans to private, diversified accounts.'