Social Security payments are slated to increase in 2023 because of elevated inflation but that may, in turn, force them to pay taxes and reduce their ability to receive government benefits, an analyst said.
"There can be some very long-term effects to high inflation COLAs," Johnson said, referring to cost-of-living adjustments. "It's like a no-win situation."
Higher monthly Social Security payments can also reduce senior citizens' ability to obtain low-income programs such as the Supplemental Nutrition Assistance Program, or food stamps, Johnson told the outlet. They also might be disqualified from adjusted Medicare health and prescription drug benefits for low-income individuals, she told USA Today.
InflationEarlier this month, the Bureau of Labor Statistics released a report saying the Consumer Price Index, a key inflation metric, increased by 9.1 percent in June over the previous year. That's the fastest pace since November 1981.
There are “tens of thousands” of retirees, she added, who have never paid taxes on their Social Security benefits and might have to start doing so for their upcoming taxes due to the COLA increase.
“So, while a high COLA is better than no COLA at all, there are consequences that boosted Social Security income can have that affect overall financial security,” Johnson concluded.
Social Security recipients saw their benefits increase 5.9 percent in May 2022, representing the highest increase in decades, according to Johnson.