Big 2022 Social Security COLA announced after much speculation
Inflation concerns dampen potential impact of large COLA increase in 2022.
Social Security recipients are looking forward to the largest cost of living adjustment in four decades in January. The tradeoff, however, is that they may need that added income to counter rising inflation.
“COLAs are intended to protect the buying power of Social Security benefits but, according to consumer price data through July of 2021, Social Security benefits have lost nearly one-third of their buying power and 32 percent since 2000, about the length of a typical retirement,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League.
“Even worse, it appears that inflation is not done with us yet, and the buying power of Social Security benefits may continue to erode into 2022.”
The Social Security Administration announced that the COLA in 2022 will be 5.9 percent, compared to an average of 1.4 percent over the past 12 years.
The COLA in 2021 was 1.3 percent and raised average monthly benefits by about $20. The 2022 COLA will increase an average monthly retirement benefit of $1,565 to roughly $1,657, an increase of $92.
Although the increase is welcome, Social Security recipients say that years of low COLAs in the past made it next to impossible to cope with the rampant inflation of 2021, because COLAs haven’t kept pace with some of the fastest-growing costs of older households.
“Over the past 21 years, COLAs have raised Social Security benefits by 55 percent, but housing costs rose nearly 118 percent and health-care costs rose 145 percent over the same period,” Johnson said. “These two categories in particular are not adequately accounted for in the COLA.”
Related: 10 fastest-rising costs for older Americans since 2000
Johnson compiled a list of spending categories that are likely to be the biggest challenges for older households in 2022:
- Food. The USDA estimates that food-at-home prices are expected to increase between 1.5 and 2.5 percent, and food-away-from-home prices are expected to increase between 3 and 4 percent.
- Rental housing. Rental increases appear to be coming in higher than normal in 2022 (7 percent and higher) in reaction to the expiration of eviction moratoriums that forced normal rent increases to temporarily be halted.
- Owner housing. Mortgage rates are expected to rise in reaction to higher new home prices, the costs of building and materials, and rising interest rates. Higher prices also will mean higher local real estate taxes and insurance costs.
- Home heating. With rising demand and shrinking inventories, the cost of heating a home with oil and natural gas this winter is expected to climb by about 21 percent to 25 percent.
- Drugs. The Centers for Medicare & Medicaid Services estimates that prescription drug plan premiums will increase almost 5 percent in 2022, and the Part D out-of-pocket threshold before reaching the catastrophic phase of coverage is growing by 7.6 percent.
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