The Impact of Inflation on Social Security Benefits
The brief’s key findings are:
- The recent spurt in inflation is an important reminder that keeping pace with the cost of living is one very valuable feature of Social Security.
- However, some of the inflation protection offered by Social Security’s COLA is undermined by two factors:
- Medicare Part B premiums – deducted from Social Security benefits up front – tend to grow faster than the COLA; and
- a growing portion of benefits are subject to income tax.
- These factors reduce the net benefit that retirees get to cover shelter, food, and clothing.