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Social Security COLA update: Benefits are going up, but it’s not all great news for seniors

Experts believe inflation will stretch into 2022, and it’s likely most seniors will also have to absorb an increase to their Medicare Part B premiums.

Social Security COLA update: Benefits are going up, but it’s not all great news for seniors
[Source Image: Social Security Administration]

American retirees who’ve seen meager increases to their Social Security checks for the past decade, and likely just modest ones for their entire retirement, got some exciting news from the government today: The Social Security Administration announced that the roughly 70 million who rely on Social Security and Supplemental Security Income benefits will receive a 5.9% cost-of-living adjustment (COLA) for 2022—the single biggest jump since 1982. For the average Social Security benefits check of $1,565, this would hand that check’s recipient an additional $92 a month.

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Social Security checks get a cost-of-living adjustment every year, which the agency bases on changes in the consumer price index for urban wage earners and clerical workers (known as the CPI-W). For the past decade, the annual adjustment has averaged 1.4%, thanks to abnormally low inflation. But new Labor Department data predicts next year’s CPI-W will increase by 5.9%.

Trillions of dollars of economic stimulus spending have propped up consumer demand during the pandemic, when personal finances got tight, and supply chains for everything from toilet paper to iPhones have bottlenecked, creating surges in price. If these hikes level back out next year, the boost to Social Security benefits could prove significant to seniors. However, if inflation continues apace in 2022, analysts are warning it’s “a different picture.”

The bad news is many experts do believe inflation will stretch into 2022. Meanwhile, it’s likely most seniors will also have to absorb an increase to their Medicare Part B premiums of around the same amount—6% or so—which equals about $10 more per month. For most seniors, Medicare premiums get automatically deducted from Social Security checks.

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Some advocates for the elderly are therefore underwhelmed by Social Security’s biggest boost in a generation. They argue that since 2000, beneficiaries have lost a third of their buying, citing stats that show the Social Security Administration’s cost-of-living adjustment has grown only half as fast as seniors’ actual costs. Their argument naturally boils down to a bigger fight: that the CPI-W index is a terrible reflection of retirees’ true spending habits. They claim younger urban workers buy more gas, electronics, and stuff online. Seniors spend a disproportionate chunk of their income on items that saw the worst price hikes during the pandemic, like food and medicine.

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