Social Security recipients will soon start receiving a record-high increase to their benefits, with the first larger payment set to be delivered to recipients this week.
The increase, known as a cost-of-living adjustment (COLA), is the largest since 1981, when recipients saw an 11.2% jump. This year's 8.7% increase will boost the average monthly benefit by about $140 to $1,827 a month. That compares with the typical benefit of $1,681 in 2022.
The payments are scheduled to begin on Wednesday for recipients born between the first and 10th of a month, according to the Social Security Administration. The second wave of payments will go out on the second Wednesday of the month, followed by the third and final round on the fourth Wednesday of the month.
More than 66 million Americans collecting Social Security will receive the bigger payments.
The higher payments came in response to the hottest inflation in four decades: Prices paid by U.S. consumers hovered around a four-decade high from August through October, the time period in which the COLA is calculated.
"A Social Security cost-of-living-adjustment of 8.7% is rare – enjoy it now," said Mary Johnson, a policy analyst at the Senior Citizens League. "This may be the first and possibly the last time that beneficiaries today receive a COLA this high."
Still, the decades-high benefit increase is not always good news for recipients, according to Johnson.
Higher Social Security payments are a bit of a Catch-22. They can reduce eligibility for low-income safety net programs like food stamps and can push people into higher tax brackets. More significant payments, essentially, do not necessarily result in more money in people's pockets.
Benefits in 2022 jumped by 5.9%, which amounted to an average monthly increase of $92 for retired Americans, bringing the total amount to $1,657, the Social Security Administration announced last year.
Soaring inflation has already eroded the entirety of the increase, however, with recipients losing 46% of their buying power – or about $508 – every month for the year, according to calculations by the Senior Citizens League.
What's more, the unusually large COLA could move the Social Security insolvency date forward by more quickly depleting the funds.
The average monthly benefit would have to increase by $417.60 for retirees to maintain the same level of purchasing power as in 2000.