The Impact of Inflation on Social Security Benefits

Source: Alicia H. Munnell and Dan Muldoon, Center for Retirement Research at Boston College, Issue in Brief, IB#8-15, October 2008

The brief’s key findings are:
• Today, Social Security announced that benefits will rise by 5.8 percent in 2009.
• Social Security is virtually the only source of retirement income that offers inflation protection.
• However, two factors undermine that protection:
o Medicare premiums generally rise much faster than the COLA – 9.8 percent per year compared to 2.7 percent from 2000-2007.
o Income thresholds for Social Security benefit taxation are not adjusted for inflation or wage growth, so more recipients are subject to taxes each year.

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