Even though estimates for the 2023 COLA increase are looking to give significant boosts to benefit payments — potentially a 10.8% increase — there are several reasons seniors should hold off on their excitement.

Flawed COLA Calculations

First and foremost, there are significant flaws in the cost-of-living adjustment (COLA) calculations. It’s well known that these increases don’t “keep up with the real inflation rate for retirees,” as this Nasdaq article reports.

In fact, Social Security benefits have lost around 40% of their buying power in 22 years, and a whopping 10% over the past 2 years alone.

Medicare Premiums

Additionally, the article notes that Medicare premiums are likely to increase. Both the Medicare Part B and Medicare Part D premiums are based on the individual’s income. This means that with a larger benefit payment, individuals are likely to have larger premiums.

The rates for next year have not been revealed yet, however, it’s a good thing for seniors to keep in mind when considering the potential pay increase.

Higher Taxes Likely

Finally, it’s important to remember that your taxes are likely to be higher as well. Federal taxes can apply to your Social Security benefit payments if you meet one of these three qualifications:

• You have a tax return filed as single and your total income is greater than $25,000.
• You filed a joint federal tax return and the combined income tops $32,000.
• Typically, if you’re married and file separately.

Additionally, senior citizens could be subjected to state taxes; specifically, those residing in one of the twelve states that tax Social Security benefit payments. These states include: Colorado, Connecticut, Kansas, Minnesota, Mississippi, Montana, Nebraska, New Mexico, Rhode Island, Utah, Vermont, or West Virginia.

As you can see, retirees should hold off on their excitement over the 2023 estimates; they may not help as much.

Social Security Improvements Needed

Overall, the Social Security program needs improvements. That’s why the Senior Security Alliance is urging the politicians in Congress to act and pass our bill. With this bill, we guarantee senior citizens’ will never have their benefit payments cut, benefit payments will no longer be taxable, and more. Join us and help create the change senior citizens deserve.

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