Social Security cost of living adjustment highest since 1982
Millions of retirees and other Americans are receiving social Security After the pandemic-induced inflation spike, benefits in 2022 are set to achieve the biggest payout growth in four decades.
The Social Security Administration said Wednesday that next year’s cost of living adjustment, or COLA, would be 5.9%. The monthly increase for the retirees averaged $92 as of Wednesday, bringing that amount to $1,657, the administration said. A typical couple’s benefits would climb from $154 to $2,754 per month.
The increase — the sharpest annual adjustment since 1982, when recipients saw a 7.4% jump — marks an abrupt end to low inflation that saw meager COLA growth in years. Over the past 12 years, the average COLA increase has been only 1.4%. In 2021, recipients only received a 1.3% increase, or an additional $20 per month for retirees.
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The adjustment will affect about 70 million people, including Social Security recipients, disabled veterans and federal retirees. About half of senior citizens live in homes where Social Security benefits provide at least half of their income, while about 25% rely on monthly payments for nearly all of their earnings.
The Senior Citizens League, a nonpartisan advocacy group, called the decades-high growth “welcome” but warned that years of modest COLA increases have made it “next to impossible to tackle the rampant inflation of 2021”. .
Mary Johnson, an analyst with the group, said, “Over the past 21 years, COLAs have increased Social Security benefits by 55 percent, but housing costs have risen nearly 118 percent and health care costs by 145 percent. ” “Worse, it appears that inflation hasn’t happened to us yet, and the purchasing power of Social Security benefits could run out in 2022.”
The annual Social Security change is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.
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Consumer prices have risen dramatically over the past few months, with Federal Reserve Chairman Jerome Powell attributing a surge to pandemic-induced disruptions in the supply chain, labor shortages that push wages higher and incentives. A wave of consumers flowed with cash. Everything from gasoline to toilet paper to groceries is now priced higher, with the highest inflation rate in more than a decade.
Still, Powell and other Fed officials have mostly said they expect the increased inflation to be fleeting and fade as the economy recovers from the pandemic.
According to the Senior Citizens League, since 2000, Social Security benefits have lost about 30% of their purchasing power due to insufficient adjustments, which drive up inflation and increase health care costs. The group has prompted Congress to adopt legislation that would index inflation adjustments specifically for senior citizens, such as the Consumer Price Index for the Elderly, or CPI-E. The index specifically tracks household expenses for people aged 62 and above.
On the campaign trail, President Biden said he supported increasing Social Security solvency by adjusting annual adjustments to the CPI-E instead of the CPI-W.