Retirees and Savers Get Some Help From Treasury and Social Security

The past few weeks have seen both the Social Security Administration and the United States Treasury Department announce new program changes that should bring smiles to the faces of retirees and savers.  

First, the Social Security Administration announced that the 2023 cost-of -living adjustments for all recipients of Social Security benefits will be 8.7%, which should increase the average monthly check starting in January for each recipient by more than $140.  Further, according to Kilolo Kijakazi, Acting Commissioner of the Social Security Administration, “Medicare premiums are going down and Social Security benefits are going up in 2023, which will give seniors more peace of mind and breathing room. This year’s substantial Social Security cost-of-living adjustment is the first time in over a decade that Medicare premiums are not rising.”

The rising inflation in 2022 surpassed the 5.9% in 2021. Prior to last year, the highest inflation in a calendar year occurred in 2009, when the cost-of-living index rose 5.8%.

The second bit of good news during the last month was issued by the Treasury Department, which announced that the rate of Series I bonds for the next six months would be 6.89%. (Series I bonds are inflation protected and are virtually risk-free.)

The Series I bonds issued during the six month period from November 1st, 2022 and  through May 31, 2023 will return the 6.89% during that period and then have the rate adjusted for the next six months. As long as the bonds are held for five years, all the accumulated interest is paid when they are cashed in. Bonds cashed in after one year and sooner than five years lose one three month quarter period of interest.

Other downsides of Series I bonds include a purchasing restriction of one $10,000 bond per calendar year per individual.  It is possible to purchase an additional bond through a business, trust or estate. However, in any case, the number of bonds that can be purchased in a calendar year is still limited.

Despite the limitations, potential penalties and the reduction in interest as the economy cools, the use of Series I bonds produces a greater short to medium term return for investors than other bonds which are currently paying significantly lower returns. Long term investors may find that I bonds do not fit into their portfolios.