Social Security benefits struggle to keep up with inflation
Yahoo Finance columnist Kerry Hannon joins the Live show to detail the pace at which Social Security benefits are increasing by to try to stay ahead of inflation and rising costs.
Video Transcript
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- Welcome back to Yahoo Finance Live. Let's take a look at how the markets closed on this hump day. No chance of getting over that hump. A lot of red on the board. The Dow dropping 270 points about 0.8%. The S&P drops 45. The NASDAQ down 3/4 of a percent, 89 points. And that check of the market sponsored by Tastyworks. Seana?
SEANA SMITH: All right, Dave. Well, rising inflation has sent the cost of living to record highs and is having an impact on everyone from millionaires to retirees. So as a result, Social Security beneficiaries will receive a boost to their monthly checks. But will it be enough? That's a big question. Yahoo Finance Senior Columnist Kerry Hannon joins us now with that. And Carrie, how big of a boost are we expecting?
KERRY HANNON: Well, I'm telling you we're not going to really know until October, but the numbers that are being tossed around is around 8% or even 8.6% is one estimate of what is likely based on inflation. Now they compute it all running up till October to see how the inflation is running. But here's what happened. I mean, last week the Social Security Administration came out with their trustee's report, which they estimated that they would perhaps increase the cost of living for Social Security beneficiaries by 3.8% for next year.
But it looks like even walking back one of the high administration officials who talked about it afterward said, you know what? We did those numbers in mid-February and it actually looks like we may be much closer to 8%. So I'm seeing somewhere in that range.
SEANA SMITH: Kerry, what does this do for the program's funding? Because you would think that would be in question here if we do see such a big hike.
KERRY HANNON: You know, that's a really good question. And the people I talked to said actually, it really depends on how long inflation lasts for, right? So the way they're looking now is it's not long run and they don't see it really having a heavy impact at the moment on the solvency of the fund in the future and so forth and the financial viability of it. But what is important to note is even with an 8 per 6, even if it was that 8 per 6, I keep saying it wrong, sorry, 8.6% increase per month, what would happen is many people say that's not even keeping pace with inflation. There would still be a shortfall for retirees. And that benefits from-- if you went back to 2020 that the cost of what you could buy with your check has dropped by 40%.
So it is pretty significant. And really the retirees are getting hit the hardest by this are folks that haven't saved for retirement, that they depend on that check for 90% or so of their daily living costs or their monthly costs. This is a significant amount of money for them. And if you live in rural America and you're depending on a car, the cost of gasoline, as we all know, has just skyrocketed. And that's really taking a hard hit.
And again, this year, of course, we had a bump up this year a 5.9% in the benefit to kind of address these inflationary issues. It just wasn't enough. But in that calculation, it was the Medicare jump up in the cost of Medicare B that really prompted some of that increase right there. But just simply the cost of living is really a hardship for many, many people.
SEANA SMITH: Yeah, it certainly. Talking about gas prices up to $4.96 a gallon the National average. So people paying more in almost every aspect of their life at this point. Kerry Hannon, thanks so much for joining us.
