Social Security checks will get bigger starting in January.
The Social Security Administration announced on Oct. 13 the Social Security Cost of Living Adjustment (COLA) would be 5.9% in 2022, the largest increase since 1982.
The increase reflects the rising cost of goods as the annual inflation rate hit 5.4% in September, a 13-year high.
The increase will apply to both Social Security and Supplemental Security Income benefits. Nearly 70 million people receive either Social Security or SSI, and 40% of seniors rely solely on Social Security benefits for income, according to the National Institute on Retirement Security.
The average monthly Social Security retirement benefit is $1,565, which means after the increase, the average will climb by about $92 a month beginning with the January 2022 check. In comparison, the 2021 COLA was 1.3%, an increase of about $20 a month.
Advocates for seniors hailed the increase as an important boost to benefits.
“Today’s announcement of a 5.9% COLA increase, the largest increase in four decades, is crucial for Social Security beneficiaries and their families as they try to keep up with rising costs,” AARP Chief Executive Officer Jo Ann Jenkins said in a news release. “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.”
The Social Security Administration will notify recipients of their new monthly benefit amount by mail in December, or recipients can view their new amount online through their My Social Security Account.
Social Security recipients who also receive Medicare won’t be notified of their new amount until Medicare premium changes for 2022 have been announced.
What does it mean?
While the COLA increase is the largest in 40 years, it only slightly tops the rate of inflation. Supply chain issues, an increased money supply and other lingering economic effects of the pandemic are driving the price of everyday goods higher.
Food costs are at a 10-year high, with prices 4.6% higher than they were a year ago, and the increase in energy prices is nearly 25% higher than a year ago.
These rising costs have put pressure on Social Security-dependent seniors. The average monthly retirement benefit equates to a yearly income of just $18,156, so any increase in prices can affect a senior’s ability to make ends meet.
While the 5.9% COLA increase is a welcome adjustment, some say it’s not enough.
“Over the past 21 years, COLAs have raised Social Security benefits by 55%, but housing costs rose nearly 118 percent and health care costs rose 145% over the same period,” Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, a nonpartisan lobbying group representing seniors, said in a release.
With inflation expected to continue well into 2022, Johnson says she worries about the ability of seniors who rely on Social Security to keep up.
“COLAs are intended to protect the buying power of Social Security benefits, but according to consumer price data through July of 2021, Social Security benefits have lost nearly one-third of their buying power, 32 percent, since 2000, about the length of a typical retirement,” she said.