By: Russ Kamp, Managing Director, Ryan ALM, Inc.

With the demise of the defined benefit plan for many works in the US private sector, Social Security benefit payments become ever more important for a greater percentage of the American retirees and those with disabilities. There have been several stories recently about Social Security and what the “average” recipient might receive in 2024 and worse, what their benefit reduction might be should the forecast of a “lock-box” shortfall in 2033 come to pass. We’ll get the official word on the 2024 COLA sometime in October, but early estimates are forecasting a 3% increase during 2024. This is a far cry from the nearly 9% increase received in 2023 and at 3%, barely matches the headline CPI which came in at 3.2% today.

Social Security’s average monthly benefit among all retired workers is $1,789 in 2023, according to the Senior Citizens League. If the 3% increase turns out to be correct, checks will increase to about $1,843 per month. If my math is correct, that equates to an additional $54/month. Please don’t plan to spend all of it too soon.  The maximum Social Security benefit for a worker retiring at full retirement age is $3,627 in 2023. A 3% COLA will bring that figure to $3,736 in 2024. For those retiring at 62-years-old the maximum benefit in 2023 is $2,572, while the maximum benefit for a worker retiring at age 70 is $4,555 in 2023. Those numbers will be adjusted accordingly.

Despite the on-going rhetoric about SS running out of money, it is a fallacy to believe that there exists an “operational constraint on the government’s ability to meet all Social Security payments in a timely manner. It doesn’t matter what the numbers are in the Social Security Trust Fund account, because the trust fund is nothing more than record-keeping, as are all accounts at the Fed.” (Warren Mosler, “Seven Deadly Innocent Frauds of Economic Policy”) He continues, “When it comes time to make Social Security payments, all the government has to do is change numbers up in the beneficiary’s accounts, and then change numbers down in the trust fund accounts to keep track of what it did. If the trust fund number goes negative, so be it. That just reflects the numbers that are changed up as payments to beneficiaries are made.”

What we should fear is our august Congress not understanding this concept and acting rashly to address the impending “crisis”. A recent article in Bloomberg placed the possible reduction in “benefits” at 23% in 2033. Try telling the nearly 70 million Americans that they will see a dramatic reduction in a promised benefit that they themselves helped to fund. With 40% of retirees using SS for more than 50% of their retirement income and another 14% in which SS makes up 90% or more of their retirement income, the economic impact from these potential benefit cuts would be cruel.