Social Security Payments To Increase By 5.9% In 2022 - Forbes

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Updated: Oct 13, 2021, 10:40am
If you rely on Social Security payments, you’re receiving a much-needed raise. Social Security and Supplemental Security Income (SSI) is increasing benefits by 5.9%, the largest increase in 40 years.
This is welcome news for Social Security and SSI recipients who have been financially battered by the pandemic and are now forced to deal with the rising costs of everything from gas to food. According to Moody’s Analytics chief economist Mark Zandi, households earning a median income of $70,000 pay around $175 extra every month.
While this is the biggest increase in years, retirees and people who receive disability payments typically get an automatic annual cost-of-living adjustment (COLA) to preserve their purchasing power and keep up with rising prices, better known as inflation.
The Social Security COLA for 2022 is 5.9%, the highest increase in almost four decades. The average Social Security check in June 2021, the latest data available, was $1,555. A 5.9% increase would raise that monthly payment to about $1,647, a $92 bump.
However, this increase can’t come soon enough for Social Security and SSI recipients whose dollar doesn’t go as far as it used to. The U.S. faces high inflation while the economy manages its recovery from the Covid-19 recession. 2021’s 1.3% COLA increase has trailed the massive year-over-year inflation that’s developed over the past few months. July 2021, for instance, saw prices 5.4% higher than they were in July 2020.
Read more: Why Is Inflation Rising Right Now?
The index used to calculate inflation for Social Security Benefits, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), is heavily influenced by gasoline prices, which are already up more than 40% this year. This, combined with general rises in the prices of other goods and services considered in CPI-W resulted in the large increase for 2022.
But even with these provisions, some argue that COLA increases won’t be sufficient to maintain seniors’ purchasing power, primarily due to rising health care costs, in addition to inflation-driven price increases.
First, there are Medicare costs to consider. For Social Security recipients who pay Part B premiums, the Social Security Administration works with the Center for Medicare and Medicaid Services to ensure COLA increases are not dwindled by annual increases in Medicare Part B payments.
Medicare’s hold harmless provision ensures Social Security benefit payments are not reduced below their current dollar value due to increases to the Medicare Part B premium. This effectively caps these premiums at the amount of each COLA for those who qualify.
When you keep your benefit dollar value the same, you wind up with less each year. Due to inflation, you’ll have less purchasing power next year than you do this year.
What’s more, the CPI-W, which tracks urban workers’ spending habits and is the measure of inflation upon which COLA increases are based, may not accurately reflect how many retirees spend their money, some argue.
The overall trends of the products and services seniors buy, like health care, frequently exceed inflation rates of those goods and services tracked by the CPI-W. Over the years, this has led to a loss in purchasing power for many seniors, compared to the amount of support Social Security was originally intended to provide, changes in Medicare premiums notwithstanding.
That’s why Rep. John Garamendi, D-Calif., recently introduced the Fair COLA for Seniors Act of 2021, which advocates for Social Security benefit COLAs based on the Consumer Price Index for the Elderly, instead of the CPI-W.
COLAs averaged 2.9% between 1982 and 2011, the legislation notes. When recalculated according to the CPI-E, however, they would have risen 3.1% on average. That can amount to hundreds of dollars of difference in monthly benefits (and thousands of dollars a year) over decades. Given that Social Security represents most seniors’ largest source of income, these increases could be invaluable to millions.
While COLAs help retirees maintain their purchasing power today, built-in Social Security increases were not always the norm.
Before 1975, Social Security benefits did not increase automatically, and Congress set any new increases through legislation. But with inflation rising in the 1970s, Congress passed the 1972 Social Security Amendments to provide automatic increases for benefits. The first COLAs rolled out in 1975, giving recipients an automatic increase of 8%.
Since the inception of COLA, increases have ranged as high as 14.3% in 1980 to no change at all based on changes to the CPI-W. The 2020 COLA was a paltry 1.3% so today’s announced increase, one of the highest in nearly 40 years, will be welcome news to senior and disabled Americans.
Kemberley (@kemcents) Washington, CPA, is a former IRS agent, news contributor, author, and owner of Washington CPA Services, LLC. Check out more of her work at
John Schmidt is the Assistant Assigning Editor for investing and retirement. Before joining Forbes Advisor, John was a senior writer at Acorns and editor at market research group Corporate Insight. His work has appeared in CNBC + Acorns’s Grow, MarketWatch and The Financial Diet.


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