Plus, members of Congress have proposed changes to how the COLA is calculated, which could result in even larger Social Security checks for 55 million retirees, their dependents and survivors. The ongoing spike in inflation that has Americans paying more for gas, food, cars and many other things could lead to the biggest Social Security boost in almost 40 years when officials announce the cost of living adjustment, or COLA, for 2022.
The 2022 COLA could be biggest since 1983
But inflation already has led to tremendous hikes in some living costs for U.S. seniors, who have had to scramble to find ways to save money, according to advocacy group The Senior Citizens League. So, even a major increase may not be enough.
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Social Security’s 2021 cost of living adjustment, which began affecting payments in January, was 1.3%. This year’s inflation has already devoured the increase.
The consumer price index, the primary indicator of inflation in America, shows it hit an annual rate of 5.4% in June — a 13-year high. A New York Federal Reserve survey found consumers expect average inflation of 4.8% for the remainder of 2021.
Based on this year’s price hikes, The Senior Citizens League is projecting that Social Security benefits could be boosted by 6.1% for 2022. If that happens, it would be the biggest raise since 1983. The Social Security Administration will announce next year’s COLA during the fall.
“Higher income could lead to trims in food stamps, rental assistance or Medicare Extra Help, which covers most prescription drug costs,” Johnson tells MoneyWise.
A generous increase could be bittersweet for some beneficiaries. Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League, says some Social Security recipients could see cuts in other benefits because of their larger checks.
Rethinking the way the COLA is calculated
Advocates have been arguing for years that Social Security COLAs shortchange seniors because they don’t accurately reflect the prices older Americans pay. A bill that would alter the way the raises are calculated has been reintroduced in the House of Representatives.
If passed, the Fair COLA for Seniors Act of 2021 would base the annual adjustment on a “consumer price index for the elderly.”
It would reflect the costs of items typically purchased by people ages 62 and up, and it could result in higher Social Security payments.
Between 2016 and 2021, increases in overall consumer prices averaged 1.3%. The theoretical price index calculated by The Senior Citizens League would have seen average 1.71% growth over the same period.
Research by The Senior Citizens League shows that focusing on prices paid by the elderly would have led to a larger COLA every year since 2016. But the differences might not have been significant.
Advocates want a sweeter COLA
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