If you use Social Security, you can expect checks to increase by 5.9% in January. This is the largest cost-of-living adjustment recipient seen since 1982. Here’s what that would look like for the average recipient:
- Retired workers will get an average of $92 more per month, bringing the average monthly benefit to $1,657.
- Workers with disabilities will get an average of $76 more per month, bringing the average monthly benefit to $1,358.
- The maximum SSI benefit for individuals will increase by $47 per month, bringing the maximum monthly benefit to $841.
5.9% of COLA seems pretty generous, considering that Social Security benefits only increased 1.3% in 2021. But with prices for everything from groceries to housing rising, would an extra $92 a month really be enough? For ordinary retirees?
Why 5.9% COLA isn’t great news
If you receive Social Security benefits, you may find that an extra $92 a month doesn’t extend far. High inflation is why checks will be higher, and likely to run into 2022. Historically, Social Security’s Social Security agreements have lagged behind inflation, which is why average interest buys are about a third lower than they were in 2000.
Also, Medicare Part B premiums, which cover doctor visits and outpatient care and are usually deducted from Social Security benefits, are expected to rise by $10 next year. This means that the average Social Security retiree will only see an extra $82 in their monthly paychecks.
According to the Seniors Association, the following categories of spending will continue to squeeze budgets for seniors in 2022:
- food: Although cost increases at the grocery store are starting to slow, the USDA estimates that grocery prices are expected to rise 1.5% to 2.5% in 2022, compared to a typical annual increase of 1% to 2%. Restaurant prices are likely to increase by 3% to 4%.
- Leasing: Seniors housing rent typically rises about 5% annually, but the Seniors Association is seeing increases of 7% and higher for 2022.
- Owner’s residence: As home prices continue to rise, so will property taxes and home insurance rates. Also, mortgage rates are expected to rise in 2022, while construction and material costs remain high.
- Home heating and natural gas: Home heating oil and natural gas costs are expected to rise 21% to 25% this winter.
- Prescription prices: Medicare estimates that prices for prescription drug plans will rise about 5% in 2022, while the minimum out-of-pocket needed for catastrophic Part D coverage will rise by 7.6% to $7,050 in 2022.
What if your Social Security COLA isn’t enough?
There are no easy solutions if your Social Security check isn’t enough, even with 5.9% COLA. If you’re struggling to pay for food, getting help from a pantry or an organization like Meals on Wheels may be an option. If you have an emergency expense, such as facing an eviction or an energy bill that you can’t afford, try calling the United Way’s 211 hotline, which can connect you to local resources.
The 5.9% increase in benefits will definitely help seniors who are dealing with higher costs. But it’s essential to be realistic about how far you’ll actually go in your retirement budget. Unfortunately, the average Social Security recipient will see that most, if not all, of his salary increase is gobbled up by the rising cost of living.
Robin Hartell is a certified financial planner and senior writer for The Penny Hoarder. She writes a personal financial advice column Dear Penny. Send your tough financial questions to [email protected]