U.S. inflation has been inching up as the economy starts to recover from the COVID-19 pandemic. While higher inflation is impacting most consumers, it's especially painful for people who are living on a fixed income like Social Security beneficiaries. Policymakers review social security benefits annually to preserve purchasing power. The Social Security Administration is due to announce the COLA (Cost-of-Living-Adjustment) for 2022 soon. Beneficiaries are eagerly awaiting the 2022 COLA update.
The rise in prices of products and services across the board has been noticeable. The U.S. inflation expectations touched a record high in September, according to the New York Federal Reserve's Survey of Consumer Expectations.
When will the Social Security Administration release its COLA 2022 update?
The COLA is calculated using the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers). The index is published monthly by the BLS (U.S. Bureau of Labor Statistics). The SSA (Social Security Administration) uses the monthly average from the third quarter of the last year a COLA was calculated compared to the third quarter of the current year.
The BLS is scheduled to release the CPI data for September 2021 on Oct.13 at 8:30 a.m. ET. The SSA could release the 2022 COLA the same day that it did last year. The beneficiaries who use the My Social Security online service can sign up to receive a message regarding this change.
$200 Social Security increase
The CPI-W for July and August averaged 267 points, which is an increase of more than 14 points over levels recorded in the fourth quarter of 2020. Based on this rate, the COLA for 2022 should be somewhere around 5.5 percent. However, if the figure for September is significantly higher, it could bump up the level.
Many economists and experts are already estimating the rise in Social Security for 2022. The largest increase in the COLA ever was 14.3 percent in 1980. In 2009, the COLA increased 5.8 percent due to the Great Recession of 2008. Since then, inflation has been modest. The COLA over the past 10 years has averaged 1.7 percent. However, the COLA for 2022 is expected to be significantly higher due to much higher inflation.
There are rumors that the COLA could be $200. However, the increases are usually calculated as a percent and not a sum of money. According to Senior Citizens League, the increase could be closer to 6.1 percent, while many others put the hike closer to 5.8 percent. Even with an increase of 6.1 percent, the average rise in Social Security would come out to be nearly $93 (based on the average benefit of $1,534 in June 2021).
Who will get impacted by the COLA?
Around 68 million people, including retirees, disabled people, and others receive social security benefits. About half of seniors are living in households where Social Security benefits account for at least 50 percent of their income.
While Social Security benefits could be about to get the largest increase in the last 40 years, many people still think that it won't lead to a significant increase in beneficiaries’ purchasing price. This could be due to additional factors like a rise in Medicare Part B premiums and taxes.