The Social Security Administration said on Wednesday that nearly 70 million beneficiaries of the program would benefit from a cost-of-living adjustment of 5.9% in 2022, the biggest increase since 1982.
The benefit hike comes in January after a year of soaring inflation, which has pushed up the cost of everything from food to rent. Many seniors and others who depend on Social Security have struggled to cope with rising inflation this year after receiving a simple 1.3% cost of living adjustment (COLA) last January, one of the smallest increases in recent history.
The Social Security Administration typically announces its COLA in the fall, with the increase taking effect for December benefits paid in January. This means that beneficiaries will receive a significant annual “raise” in January 2022, but advocates fear that the financial woes of the elderly could ease if inflation continues to soar – which many economists expect to be, at least for the next few months.
“There are more and more estimates that I see inflation will continue over the next year,” said Mary Johnson, Social Security and Medicare policy analyst at Senior Citizens League, an advocacy group. “I don’t expect a COLA of nearly 6% to restore purchasing power if inflation continues into 2022.”
Inflation accelerated in September, with consumer prices, slightly faster than their 5.3% increase the previous month, the government said on Wednesday. Core inflation – which excludes volatile food and energy costs – rose 4.0%, the same peak as in August.
Inflation is causing tough choices for seniors, Johnson said, noting that she had around 200 letters from Social Security recipients who are experiencing some form of hardship.
“I have nothing but these sinister stories,” she added. “Food is one of the number 1 problems. Once they pay their rent and their electricity, they don’t have enough money for their groceries or their prescription drugs. “
According to the National Institute on Retirement Security, about 4 in 10 seniors depend on Social Security payments as their only source of retirement income. The typical monthly benefit is about $ 1,262 in 2021, an amount just above the poverty line for a single person. A 5.9% increase in COLA adds about $ 75 per month to this benefit.
Social Security payments had lost their purchasing power even before this year’s higher inflation, the Senior Citizens League found in an analysis released earlier this month. Since 2000, government pension benefits have lost 32% of their purchasing power, the group found.
The problem, according to their analysis, is that the Social Security Administration uses an index called the Consumer Price Index for urban wage earners and office workers to set the annual increase in pension benefits. This index does not include cost increases in health insurance premiums and it underweight housing costs which are frequently experienced by the elderly, for example.
“The index that is being used is for young earners,” noted Johnson. “This does not take into account the purchasing habits of the elderly,” such as higher spending on health care.