vectorfusionart / Shutterstock.com
Social Security recipients hoping for more money to spend in 2022 must be happy — to an extent — by the Oct. 13 announcement from the Social Security Administration.
One 12 months after receiving a measly improve of their advantages, Social Security recipients will see the most important cost-of-living adjustment because the early Eighties — 5.9% — the federal company introduced.
The COLA was as excessive as 5.8% as lately as 2009, nonetheless.
The common retired employee’s cost of $1,565 per 30 days in Social Security advantages might be $1,657 after the COLA for 2022 takes impact, based on federal estimates. That’s an additional $92 every month.
The common retired couple’s collective cost of $2,599 per 30 days might be $2,753. That’s an additional $154 month-to-month — for 2 individuals.
The COLA will take impact in January for greater than 64 million recipients of Social Security advantages.
It will take impact on Dec. 30 for about 8 million recipients of Supplemental Security Income, or SSI, advantages — revenue dietary supplements for people who find themselves aged, blind or disabled, and who’ve little to no revenue.
COLAs for the previous decade have been:
- 2021 — 1.3%
- 2020 — 1.6%
- 2019 — 2.8%
- 2018 — 2%
- 2017 — 0.3%
- 2016 — 0% (no adjustment)
- 2015 — 1.7%
- 2014 — 1.5%
- 2013 — 1.7%
- 2012 — 3.6%
What is a COLA?
Cost-of-living changes are supposed to counteract the impact of inflation. As the Social Security Administration describes it:
“The purpose of the COLA is to ensure that the purchasing power of Social Security and Supplemental Security Income (SSI) benefits is not eroded by inflation.”
By regulation, Social Security COLAs are tied to the federal authorities’s Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, for the third quarter of the 12 months — particularly, the change within the index because the similar interval of the prior 12 months.
When the CPI-W reveals no common change over these 4 quarters, or if it decreases, there is no such thing as a Social Security COLA for the subsequent 12 months.
As the Bureau of Labor Statistics defines it, a shopper value index is “a measure of the average change over time in the prices paid by urban consumers for a market basket of consumer goods and services.”
Critics argue that it’s unfair to tie Social Security retirement advantages to the CPI-W as a result of it’s based mostly on prices that employees generally incur — which may differ from prices that retirees face.
In reality, a 2020 evaluation by the Senior Citizens League discovered that Social Security retirement advantages misplaced 33% of their buying energy from 2000 to 2019. This is because of retirees’ bills growing quicker than Social Security COLAs, based on the league.
Why your 2022 COLA may very well be lower than you assume
When Social Security recipients even have Medicare medical insurance, their Medicare Part B premium usually is deducted from their Social Security funds. (Part B is the element of Medicare that covers physician visits and different outpatient companies.)
So, if an enormous leap within the COLA coincides with an enormous leap within the Part B premium, the premium improve basically may cancel out half or all the COLA.
The Medicare Part B premium quantity for 2022 has but to be introduced formally. But Part B will increase have outpaced COLA will increase over the previous 20 years for causes we element in “2 Things That Hurt Social Security’s Inflation Protection.”
A current evaluation by the Center for Retirement Research at Boston College discovered that between 2000 and 2020, the common annual Part B premium improve was 5.9% whereas the common annual Social Security COLA was solely 2.2%.
In December, the federal government will notify Social Security recipients of the precise quantity of their 2022 COLA after Part B premiums are deducted. It will mail the discover and in addition put up it to the web Message Center that beneficiaries can entry by their Social Security account.
Disclosure: The data you learn right here is at all times goal. However, we generally obtain compensation if you click on hyperlinks inside our tales.