Social Security Records Large Changes in 2023
As educators reach retirement, there are three programs to which they turn their focus: the Teachers' Pension and Annuity Fund (TPAF), Social Security and Medicare. All three are funded by the government and by the workers who are covered by them and all three seem to always be in need of more money. It is hard to determine who requires the most help, but recently the one who has been getting the most attention has been Social Security. While the news actually has been positive regarding the solvency of Social Security, someone just reading the headlines could arrive at a completely opposite conclusion.
As an example, a recent newspaper headline highlighted the fact that the Social Security trust fund will be able to continue to pay out benefits for a year longer than previous estimates. Anyone reading this headline without understanding the structure of Social Security could easily assume that there would come a time when the Social Security system would be unable to pay benefits. This is precisely what far too many citizens, mostly young people, believe.
In reality, what the article was explaining was that the Old-Age and Survivors Insurance component, one of the two funds that comprise the program known as Social Security, would be able to pay full benefits to all eligible seniors and survivors until 2034. Sometime before that year, Congress, as it has done several times, is expected to take some action that will extend the full benefit payments beyond 2034.
Further, should there be no action taken before 2034, benefits under OASDI would need to be cut for everyone receiving them. Present projections are that benefits paid from 2034 to 2100 will be about 80% of those paid before the reduction unless there are actions taken in the intervening years.
The report also contained very good news for the second part of the Social Security picture, the Disability Insurance Trust. According to the analysis, disability insurance benefits will be able to be fully paid for the next 75 years, the first time in forty years that the disability picture has appeared so bright.
In keeping with the positive news for Social Security recipients, early indications point to the largest cost of living adjustment in 40 years in 2023. Since the annual cost of living adjustment is intertwined with the previous year's inflation, the inflation in the first five months of this year indicates that the upcoming year's cost of living might easily surpass the 5.9% of 2022.