Retirees and disabled people who are receiving Social Security benefits will get a 5.9% boost in benefits, thanks to a spike in inflation.
It's good news for those on stretched budgets and must live on a limited income. But many remain concerned about how much they're being hit by rapidly rising prices for many items, including food, housing and drugs.
The 2022 COLA, or cost-of-living adjustment, will add roughly $92 a month to an average retirement benefit of $1,565 a month, according to some estimates.
The Social Security Administration announced Wednesday that the 5.9% adjustment will be paid to more than 64 million Social Security beneficiaries in January. And increased payments will be made to about 8 million disabled people receiving Supplemental Security Income or SSI on Dec. 30.
Some people receive both Social Security and SSI benefits.
Higher income workers will pay more money toward Social Security benefits, too, next year. The maximum amount of earnings that are subject to the Social Security tax will increase to $147,000 from $142,800.
Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, said in a statement Wednesday that the upcoming increase is the largest inflation adjustment that most beneficiaries living today have ever seen.
"But a high COLA means exceptionally high inflation is impacting consumers," Johnson said.
The Senior Citizens League said it has received more than 200 emails over the past month from many retired and disabled individuals who live on limited incomes and say that higher prices are seriously hurting their budgets.
Many retirees aren't going to be flush with extra cash here. We'll hear more news, for example, likely in November about premium hikes for Medicare Part B.
Retirees ages 65 and older need to watch out for premium hikes for Medicare Part B, which are expected to rise in 2022 and could erode some of the COLA increases in Social Security.
Part B covers outpatient and diagnostic services. Its monthly premium, which is deducted from Social Security benefits, changes on a yearly basis.
The Social Security Administration noted: "Information about Medicare changes for 2022, when announced, will be available at www.medicare.gov. For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2022 are announced. Final 2022 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and "my Social Security" Message Center."
The boost to benefits is the highest in decades. By comparison, other sizable inflation-adjustments for Social Security included: 5.8% for payments in 2009, 5.4% in 1991, 7.4% in 1982 and 11.2% in 1981. The largest increase was 14.3% in 1980, according to Social Security data.
The cost of living adjustment was a mere 1.3% in 2021 — raising the average benefit by about $21 for monthly payments and making it one of the lowest increases on record since 1975 when Social Security started automatic annual cost-of-living allowances.
Some who are older still benefit from legacy pensions and others who were able to save are now tapping into IRAs and 401(k) plans.
But AARP notes that Social Security remains the largest source of retirement income for most Americans and provides nearly all income — 90% or more — for one in four seniors.
AARP Chief Executive Officer Jo Ann Jenkins said in a statement that the "guaranteed benefits provided by Social Security and the COLA increase are more crucial than ever as millions of Americans continue to face the health and economic impacts of the pandemic."
