Social Security’s Biggest Boost In Decades

Every October, the Social Security Administration announces a cost-of-living adjustment (COLA) that directly impacts retirees’ payments for the coming year. The Social Security Administration (SSA) announced earlier this month that Social Security benefits will increase by 5.9% in 2022, the largest annual increase in 40 years.

The cost-of-living adjustment will affect about 70 million people overall, including 64 million retirees and 8 million Supplemental Security Income recipients. The COLA will boost the average individual retirement payment to $1,657 per month next year, an increase of $92, and to $2,753 per month on average for couples, an increase of $154.

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

With the annual increase in benefits averaging just 1.65% over the last decade, the latest adjustment is much larger than in recent years. The administration also announced the maximum amount of earnings subject to the Social Security tax will rise by 2.9% next year, increasing to $147,000 from $142,800.

Inflation surges: While seniors will welcome the boost, the increase in benefits is driven by inflationary pressures which have been larger and lasted longer than many economists predicted in the wake of the coronavirus pandemic.

The Labor Department reported earlier this month that the Consumer Price Index rose by 0.4% on a monthly basis in September, and 5.4% on an annual basis. This means much if not all of the Social Security adjustment will be claimed by higher prices for all kinds of goods, from gasoline to groceries, etc.

The annual increase in Social Security benefits is not intended to provide an increase in real purchasing power. Rather, it is designed to maintain purchasing power at a steady level. But many consumer advocates say the government program has failed to do that over the years, in part because of inaccurate inflation measures.

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