Chris Farrell: After the big raise in Social Security pay, it's time for proper funding

Here's a piece of good personal finance news in our troubled, uncertain times. Social Security beneficiaries totaling some 70 million retirees, survivors of insured workers, and disabled people are getting an 8.7% cost of living increase.

The biggest increase in four decades reflects the surge in inflation. Social Security payments adjust to the average inflation rate measured by the consumer price index for urban wage earners and clerical workers for the months July, August and September compared with the same period a year ago.

Social Security monthly checks will rise by about $150, on average. The increase goes into effect in January.

There's more good financial news. Retirees on Medicare typically have their Part B premiums deducted directly from their monthly Social Security payments and they'll pay a lower premium in 2023. The reason is Medicare isn't spending as much as initially feared on the new Alzheimer's drug Aduhelm. The standard monthly premium for Medicare Part B will be $164.90 for 2023, a decline of $5.20 from the 2022 charge.

Social Security is the financial foundation of retirement. Estimates are that about half of the aged population live in households receiving at least 50% of their family income from Social Security benefits. About one-quarter receive at least 90% of their family income from Social Security. The reliance on the system runs deep because Social Security is the nation's only universal retirement system (and much more).

For example, workers largely get retirement benefits through employers. If you have an employer-sponsored retirement plan at work, you'll have some savings at retirement. Workers don't save without the option.

Economist John Sabelhaus for the AARP Public Policy Institute calculates almost 48% of workers are not covered by a retirement plan at work. For workers with less than a high school education, three-quarters aren't covered by an employer plan. Among Latinos, the figure is 64% and for Blacks 53%. Retirement income and Social Security are synonymous for many.

The 8.7% cost of living jump might hasten Social Security's currently projected 2035 date with insolvency by about a year. If insolvency does come to pass in a dozen years, Social Security would still pay about 80% of scheduled benefits. That's an undesirable outcome.

Policymakers need to get their act together and, first, boost Social Security's finances and remove the threat of insolvency and, second, make additional improvements to the program. America's aging population depends on Social Security benefits.

Farrell is economics contributor to the Star Tribune, Minnesota Public Radio and American Public Media's "Marketplace."