Social Security beneficiaries to see largest benefit increase in nearly 40 years
Starting in 2022, millions of retirees on Social Security will see a 5.9% increase in benefits.
On Oct. 13, the Social Security Administration (SSA) announced that retirees who are currently on Social Security will soon see a 5.9% increase in their monthly benefits.
This marks the biggest cost-of-living adjustment (COLA) the United States has seen since 1982, and is tied to a spike in inflation as the economy continues to recover from the COVID-19 pandemic.
“The guaranteed benefits provided by Social Security and the COLA increase are more crucial than ever as millions of Americans continue to face the health and economic impacts of the pandemic," Jo Ann Jenkins, AARP CEO, said in a statement. "Social Security is the largest source of retirement income for most Americans and provides nearly all income (90% or more) for one in four seniors.”
The new boost will amount to an extra $92 a month for the average retired worker, making the average estimated Social Security payment for a retired worker $1,657 a month, up from $1,565. The average couple’s benefits would rise by $154, from $2,599 to $2,753 per month.
The SSA also announced that the maximum earnings subject to Society Security taxes will jump to $147,000 in 2022, up from $142,800 in 2021.
Social Security benefits are adjusted annually using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
In 2021, the Social Security COLA was 1.3%. The last time the annual adjustment came close to the 2022 figure was in 2009, when beneficiaries saw a 5.8% increase.
The National Committee to Preserve Social Security and Medicare called the COLA increase “welcome news for seniors.” However, the committee also expressed a need to change the way the annual adjustments are calculated while beneficiaries confront the rising costs of living.
For instance, the average COLA in the past decade was just 1.65%, while in three of the past 12 years, the adjustment was zero.
The Labor Department reported that consumer prices increased slightly more than expected last month as energy costs surged.
“The fact that this is the highest increase since 1982 does not speak well for Social Security’s ability to keep pace with those expenses,” said Max Richtman, president and CEO of the National Committee to Preserve Social Security and Medicare, to CNBC.
Charles Blahous, a retirement policy expert and former public trustee helping to oversee Social Security and Medicare finances, noted the significance of the COLA for senior citizens.
“What people are able to purchase is very profoundly affected by the number that comes out. We are talking [about] the necessities of living in many cases,” Blahous told AP.
The Senior Citizens League (TSCL), an advocacy group for seniors, has suggested that the data used by the CPI-W doesn’t accurately reflect the spending patterns of seniors.
Mary Johnson, a policy analyst for TSCL, has called for the Social Security Administration to base its COLA on another index, the Consumer Price Index for the Elderly (CPI-E), which would put a bigger emphasis on health, food and more direct costs that seniors face.
“While the high COLA is welcome, we have received hundreds of emails from retired and disabled Social Security recipients who say that the low COLAs in recent years have not kept pace with their rising costs,” Johnson told USA Today. “That has made it more difficult for many to cope with the rampant inflation of 2021.”
The rate for Medicare B premiums for 2022, which are often deducted directly from Social Security benefit checks, is expected to be announced soon.