As a recipient of Social Security, it can be hard to keep up with all the changes that happen in the agency.
Every year, people have to look at the monthly data of the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) to try to guess and understand what effects it might have on the next year’s cost-of-living adjustment (COLA).
They also have to look at the other programs that the Social Security Administration is putting in place, partly to make the system more efficient and help more people, and partly to find ways to make it financially sound.
With all of these changes happening so quickly and the economy being so unstable, you need to know what will happen to you next year. To do that, keep reading as we talk about this subject.
Why is Social Security planning to increase the full retirement age?
There are two possible effects of this issue. First, let us talk about why Social Security is not thought to be financially stable.
Since its start in the mid-1930s, Social Security has kept Americans from falling into poverty by lowering the amount of money the government has to spend on helping people who have lost everything, especially older people.
So, an insurance fund was set up to collect and invest Americans’ savings. Once the people reached a certain age and amount of money contributed, they would get their benefits back in the form of a monthly Social Security payment.
With a growing population and higher contributions, Social Security was able to keep the system stable and help not only older people but also disabled workers, their children, spouses, and parents who had died, as well as people who were close to poverty because they did not have much money or assets.
Unfortunately, changes in population have made that model no longer work financially. The creation of Social Security checks is taking away the interest that would have been earned on money that was saved and invested.
This is why more measurements need to be taken before 2035, when the Social Security Administration thinks it will run out of money and need new federal money. One option is to raise the retirement age.
This will lower the number of people who apply for retirement benefits while increasing the amount of time and money that Americans spend paying Social Security taxes.
Aside from that, it is important to know that the Full Retirement Age (FRA) changes depending on your birth year. The younger you are, the longer you will have to wait.
But if you were born after 1960, you have to wait until you are 67 years old. If you were born in 1958, you only need 66 years and 6 months.
What other impacts of the COLA increase are expected for Social Security?
Because they are both caused by the COLA adjustment, two other effects are closely linked.
As you know, COLA has been around since 1975 to provide a standard way to change Social Security benefits on a regular basis and predictably, without having to go through Congress every time.
It also raises monthly benefits in a way that counteracts the effect of inflation on purchasing power.
Normally, this would mean that COLA only affected the money that was paid out.
However, COLA also changes other values that are related to the Social Security Administration programs.
Such as the amounts that do not count toward the retirement earnings test, the limits on income, resources, and students who are eligible for Supplemental Security Income (SSI), and the amount that each Social Security credit is worth.
It will go up from $1,730 to $1,810, and there will be a wage cap above which your income is no longer included.
Also see:-Problems with the new Social Security checks – Here’s how to avoid being affected
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