Update Shows Social Security Benefits Could Increase 6.2% in 2022
The Social Security annual COLA (cost-of-living adjustment) for 2022 could be the highest in almost four decades, according to the Senior Citizens League.
Aug. 12 2021, Published 11:55 a.m. ET
The Social Security annual COLA (cost-of-living adjustment) for 2022 could be the highest in almost four decades, according to the Senior Citizens League. The League estimates the COLA to be 6.2 percent next year.
The nonpartisan senior group based its estimate on July CPI (consumer price index) data released by the Bureau of Labor Statistics.
Inflation and rising consumer costs are the main factors that impact the COLA. The Social Security Administration adjusts the annual benefit every October based on what’s happening in July, August, and September with the CPI-W (Consumer Price Index for Urban Wage Earners and Clerical Workers).
For July, the CPI-W increased 6.0 percent over the last 12 months, according to the Bureau of Labor Statistics report.
“The estimate is significant because the COLA is based on the average of the July, August and September CPI data,” said Mary Johnson, a Social Security policy analyst for The Senior Citizens League. “With one-third of the data needed to calculate the COLA already in, it increasingly appears that the COLA for 2022 will be the highest-paid since 1983 when it was 7.4 percent.”
The Social Security adjustment for 2021 was the lowest in history.
For 2021, the COLA was 1.3 percent, which is one of the lowest adjustments ever paid. It was based on the CPI-W estimated inflation of 1.4 percent in 2020.
The average benefit paid this year was about $20, which was hardly enough for seniors to pay for goods and services when prices for everything from pork chops to gasoline started to climb in March as the economy started to show signs of recovery from the COVID-19 pandemic.
About 86 percent of Social Security recipients saw their expenses increase by more than 1.3 percent, according to the Senior Citizens League. In a survey of what financial actions seniors took during the pandemic, 34 percent spent their emergency savings, 20 percent made changes to their retirement savings investments, and 19 percent visited a food pantry or applied for SNAP (Supplemental Nutrition Assistance Program) benefits.
“When the prices on the goods and services that retirees depend on go through the roof, their Social Security benefits don’t buy as much, and that causes enormous financial stress for all retirees," Johnson said.
Johnson estimates that the buying power of Social Security benefits has decreased by 30 percent since 2000.
Senior Citizens League wants benefit adjustments based on the CPI-E.
The annual Social Security COLA should have a guaranteed minimum of 3 three percent, according to the Senior Citizens League. The nonpartisan group also asked Congress to calculate the COLA using the CPI-E (Consumer Price Index for the Elderly) instead of the CPI-W.
The CPI-W doesn’t include spending patterns of households with retirees age 62 and older, the group says. Retirees and disabled Social Security beneficiaries spend their money differently than young workers, with more going to healthcare and housing than gasoline. The CPI-E also tends to grow faster than the CPI-W in most years.