Social Security Check Increase – This is the New Expected Plan

If you are already working, you are unlikely to notice the annual increase in Social Security benefits. In the end, seniors will appreciate the information, and you won’t have to think about it for a while. This would be a poor decision because it would reveal that you may not have sufficient knowledge of how the vast and complex U.S. retirement system and its related programs work. This may seem like a cliché, but it is all connected. The Social Security Administration (SSA) is in charge of all the programs associated with what you call the retirement system. Essentially, the program is run as an insurance plan where everyone who wants to be covered (and thus receive Social Security benefits) must pay a certain amount of money (which is the same amount you pay for your car insurance premium).

How do Social Security taxes impact Social Security benefits?

A portion of your pay is deducted to pay this amount, and if you are an employee, your employer also contributes an equal amount. It’s called the Social Security tax. The total amount paid will increase over time. It not only determines how much you will receive in Social Security benefits when you retire, but it also triggers benefits under related programs, such as the Survivors Program (which provides your dependents with an amount equal to your income if you are deemed disabled) or the Disability Insurance Program (which provides you with an amount of money if you are declared disabled).

Inflation affects the money you pay into the system and the money the system pays out in Social Security benefits, which means they lose purchasing power over time. This is bad news for your savings and the money you will receive in retirement. The cost-of-living adjustment (COLA) is the index that has been used to change amounts since 1975. The concept is simple: your retirement income is adjusted by this index in the same way that your earnings and all other goods and services are adjusted for inflation. However, it extends to other parts of the system and not just Social Security benefits, and SSA uses it to calibrate other variables, such as the amount that will correspond to a credit when you pay your Social Security taxes (you need at least 40 credits to be covered).

Why should beneficiaries be worried about an increase in their Social Security benefits?

You can analyze this issue from different perspectives. If you look at it from the retiree’s perspective, the increase in Social Security benefits will directly affect the quality of your livelihood for the following years. That is why politicians such as Senator Bob Case and Representative Ruben Gallego have introduced a new proposed law called “the Boosting Benefits and Cost of Living Adjustments (COLAs) for Seniors Act,” which aims to modify one of the criteria used for the current cost of living adjustment calculation, the cost-of-living index.

Usually, the index used is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index considers the spending preferences of families who at least earn 50% of their income from a person who has a wage-paying job or a clerical one. However, seniors’ organizations such as the Seniors Citizens League or the AFSCME Arizona Retirees, Chapter 97, have expressed their concerns about how this index may skew the adjustment in Social Security benefits as the population used for the analysis is not composed of seniors, and as we age, we change our spending priorities. For the moment, it is crucial to keep an eye on the planned increase for 2025 that will be out in October this year.