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Social Security recipients get 5.9% increase, but rising prices will offset the boost

<i>William Thomas Cain/Getty Images</i><br/>Social Security recipients will see their monthly checks soar by 5.9% next year
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William Thomas Cain/Getty Images
Social Security recipients will see their monthly checks soar by 5.9% next year

By Tami Luhby, CNN

Social Security recipients will receive an annual cost of living adjustment of 5.9% next year, the largest increase since 1982, the Social Security Administration announced Wednesday.

The spike will boost retirees’ monthly payments by $92 to an estimated average of $1,657 for 2022.

“This would be the highest COLA that most beneficiaries living today have ever seen,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League.

But that doesn’t mean they’ll be able to go on a spending spree. The reason for the hike is because inflation is soaring too.

The roughly 70 million people who get Social Security, including retirees, Americans with disabilities and others, receive a cost of living adjustment, or COLA, each year. It’s based on a one-year increase in inflation and is designed to help beneficiaries cope when prices rise.

In 2021, the adjustment was 1.3% — which translated into a roughly $20 a month increase for retired workers. Over the past 12 years, the boost has averaged 1.4%, according to the league.

After decades of inadequate increases, the 2022 boost finally matches beneficiaries’ rising costs more closely, said Nancy Altman, president of Social Security Works, an advocacy group.

“But large as it may appear on paper, it is not nearly enough for seniors and people with disabilities on fixed incomes to make ends meet,” she said.

Some 40% of beneficiaries depend on the monthly checks for at least 90% of their income, and two-thirds of recipients depend on the payments for at least half of their income.

The annual increase hasn’t kept pace with the rising costs of the goods and services that retirees typically use, according to a recent study by The Senior Citizens League. It noted that it has received more than 200 emails over the past month, with many retired and disabled senders saying rising inflation is making it impossible for them to pay their bills.

RELATED: Retirees are getting hit by rising prices. Here’s what will soften the blow

Social Security benefits have lost 32% of their buying power since 2000, the advocacy group found. The annual adjustments have increased payments by a total of 55%, but seniors’ typical expenses have grown nearly 105% over the same period.

The soaring cost of gas, used vehicles, home heating oil, bacon, eggs, beef, milk and home care for the elderly were among the fastest-growing expenses for older Americans over the year ending July 2021, the league found.

The national average price for gasoline hit $3.27 a gallon on Monday, according to AAA. That’s the highest in seven years and near double the price in April 2020.

Housing costs rose nearly 118% and health care costs increased 145% since 2000, said Johnson. These two categories are not adequately accounted for in the annual adjustment, she said.

Social Security’s cost of living adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. It is slightly different than the broader and better known Consumer Price Index for all Urban Consumers.

Medicare Part B premiums, which are typically deducted from Social Security checks, are also expected to increase significantly next year. Medicare’s trustees estimated in August that the standard monthly premium will jump about 6.7% for 2022.

Social Security’s finances remain on shaky ground. The trust fund that pays benefits to retirees and their survivors will be depleted by 2033 and only able to distribute roughly three-quarters of promised payments unless Congress addresses the program’s long-term funding shortfall, according to the most recent Social Security trustees’ report.

That’s one year earlier than reported in 2020 due to the pandemic, which reduced the number of workers paying Social Security tax. But Covid-19’s long-term effects on the trust funds remain unclear.

The maximum earnings subject to the tax will rise to $147,000 for 2022, up from $142,800 this year.

This story has been updated with additional background information.

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Comments

7 Comments

        1. Socialist Security is broke. Huge amounts of money are taken from WORKING PEOPLE paychecks. Its time to end this burden on people who work and make the freeloaders pull there own weight.

        2. She must be joking Barney. I paid into SS my entire life since my teens. That money could have been invested in a place much better return, but I still expect to be paid back according to the contract in place.

  1. Is the 5.9% a baseline increase or is this just the COLA increase? Until SS checks are increased at the same percentage rates that minimum wage has increased by, a 5.9% COLA increase won’t do squat to help. As a baseline increase?, maybe. But doubtful. Especially when Medicare will step in and take the bulk of that and inflation takes more than the rest. How does this help anyone on a SS income? I was disabled at age 36 and unable to work. Did I get the same senior discount as those who were 65 and older? Hell no! Totally unfair by today’s standards and back then it was still unfair and wasn’t right.

    When a person with no formal training, trade or education can earn a living wage on minimum wage, focusing primarily on the restaurant & fast food industry, they no longer require the tips they got for providing good service. Tips are/were given for two reasons. 1) To help offset the gap of minimum wage to reflect a minimum living wage, 2) It also reflected the quality of service they provided to their patrons. Which could mean all the difference in the world between a minimum living wage and a better wage. SS does not reflect a living wage by any means. Even at the bare minimum of a living standard those on SS only have to rely on Big Government to subsidize everything which makes their living standard better than most people who have to pay for everything. So, all of those establishments who are now paying a minimum living wage to their employees with no formal training, trade or education should be giving seniors a pretty hefty discount to offset their SS income to reflect a living wage. The liberals are screaming (ARRRRGH) equity when they really mean equality and it’s only fair for businesses to contribute to the senior’s income to be equal to a living wage. Especially the food industry. Though I don’t agree with a living minimum wage seniors & those on permanent disability should be better taken care of by the private sector. They deserve it.

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