Social Security recipients hoping to have more money to spend in 2022 should – somewhat – be pleased with the October 13 announcement from the Social Security Administration.
One year after receiving a small increase in their benefits, Social Security recipients will see the largest cost-of-living adjustment — 5.9% — since the early 1980s, the federal agency announced.
However, COLA was up 5.8% through 2009.
The average retired worker payment of $1,565 per month in Social Security benefits will be $1,657 after the COLA of 2022 takes effect, according to federal estimates. That’s an extra $92 each month.
The average collective payment for a retired couple of $2,599 per month would be $2,753. That’s an additional $154 per month – for two people.
The COLA will take effect in January for more than 64 million Social Security benefits recipients.
It will become effective December 30 for about 8 million beneficiaries of Supplemental Security Income or Social Security benefits – income supplements for people who are elderly, blind or disabled and who have little or no income.
COLAs in the last decade have been:
- 2021 – 1.3%
- 2020 – 1.6%
- 2019 – 2.8%
- 2018 – 2%
- 2017 – 0.3%
- 2016 – 0% (no modification)
- 2015 – 1.7%
- 2014 – 1.5%
- 2013 – 1.7%
- 2012 – 3.6%
What is COLA?
Cost-of-living adjustments are intended to counteract the impact of inflation. As the Social Security Administration describes it:
“The purpose of the COLA is to ensure that the purchasing power of Social Security benefits and Supplemental Security Income (SSI) is not eroded by inflation.”
By law, Social Security contracts are tied to the federal government’s Consumer Price Index for Urban and Clerical Workers, or CPI-W, for the third quarter of the year—specifically, the change in the index since the same period in the previous year.
When the CPI-W shows no mean change during these four quarters, or if it decreases, there is no COLA for the next year.
As defined by the Bureau of Labor Statistics, the Consumer Price Index is “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.”
Critics argue that it is unfair to link Social Security retirement benefits to the CPI-W because it depends on costs Workers Usually incurred – which can differ from the costs you incur retired Face.
In fact, a 2020 Senior Citizens Association analysis found that Social Security retirement benefits lost 33% of their purchasing power from 2000 to 2019. This is due to retirees’ spending increasing faster than Social Security guarantees, according to the league.
Why 2022 COLA Might Be Less Than You Think
When Social Security recipients also have Medicare, the Medicare Part B premium is generally deducted from their Social Security payments. (Part B is a component of Medicare that covers doctor visits and other outpatient services.)
Therefore, if a large jump in COLA coincides with a large jump in the premium for Part B, the increase in premiums can cancel out part or all of the COLA.
The amount of the Medicare Part B premium for 2022 has not been officially announced. But Part B increases have outpaced COLA increases over the past two decades for reasons we detail in Two Things That Hurt Social Security Protection from Inflation.
A recent analysis by the Center for Retirement Research at Boston College found that between 2000 and 2020, the average annual increase in Part B premium was 5.9% while the average annual Social Security COLA was just 2.2%.
In December, the government will notify Social Security recipients of the exact amount of the 2022 COLA after deducting Part B premiums. It will mail the notice and also send it to an online message center that beneficiaries can access with their Social Security account.
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