While the potential 10.5% cost-of-living adjustment (COLA) for Social Security recipients was recently applauded for topping the current 9.1% inflation in the U.S., the average $175.10 monthly boost for seniors is actually a double-edged sword.
Older Americans who have signed up for Social Security have been hamstrung since 1984 in terms of the taxes they must pay, especially if they should return to the workforce to earn some extra income, as Fox Business reports.
The potential COLA boost that would raise the average retiree benefit from $1,668 to $1,843 a month, would give Social Security recipients $22,116 a year to live on, according to estimates by The Senior Citizens League Policy Analyst Mary Johnson.
If any of those Social Security recipients were to earn just an additional $2,884, if they file their taxes as a single individual, or $9,884, if they are married, that would knock them into the tax bracket where the IRS taxes their income, including Social Security. This law, in place and unchanged since 1984, applies to individuals earning more than $25,000 a year and couples taking in $32,000 or more annually.
What’s more, taxes on Social Security recipients rise to as much as 85% of income for individuals earning more than $34,000 a year and couples, $44,000.
So, that puts a 10.5% COLA — the most generous since 1981’s 11.2% increase — in sharper focus.
Even if a senior was to decide to beat inflation by getting back into the workforce, the Internal Revenue Service’s 85% tax rate is a powerful disincentive not to take this proactive step.
The bottom line is that red-hot inflation is hurting all Americans: working Americans, lower-income Americans, families, and, especially, senior citizens living on extremely modest means.
It is inevitable that soaring energy, food, and housing costs are going to leave many elderly Americans feeling pretty miserable and in the lurch.
Social Security Checks Could Increase More Than 10 Percent Due to Inflation
© 2023 Newsmax Finance. All rights reserved.