WASHINGTON (AP) – Millions of retirees on social security will see a 5.9% increase in benefits for 2022. Biggest cost-of-living adjustment in 39 years follows soaring inflation as the economy struggles to get rid of the coronavirus pandemic.
The COLA, as it’s commonly known, stands at an additional $ 92 per month for the average retired worker, according to the Social Security Administration’s estimates Wednesday. This is a sharp break from a long lull in inflation that has seen cost-of-living adjustments averaging only 1.65% per year over the past 10 years.
With the increase, the estimated average Social Security payment for a retired worker will be $ 1,657 per month next year. The benefits for a typical couple would increase from $ 154 to $ 2,753 per month.
But that’s just to help offset the rising costs beneficiaries are already paying for food, gas, and other goods and services.
“It’s going pretty fast,” said retiree Cliff Rumsey of increases in the cost of living. After a career in sales for a major steel maker, Rumsey lives near Hilton Head Island, South Carolina. He has been caring for his wife, Judy, who has advanced Alzheimer’s disease at home for almost 60 years. Since the coronavirus pandemic, Rumsey said he has also noted price increases for salaries paid to caregivers who spell it out occasionally and for personal care products for Judy.
COLA affects household budgets for about 1 in 5 Americans. That includes Social Security recipients, disabled veterans, and federal retirees – nearly 70 million people in all. For baby boomers who retired in the past 15 years, this will be the biggest increase they’ve seen.
Among them is Kitty Ruderman from Queens in New York, who retired from a career as an executive assistant and has been collecting Social Security for about 10 years. “We wait to hear each year what the increase will be, and each year it has been so insignificant,” she said. “This year, thank goodness it will make a difference. “
Ruderman says she is timing her runs to take advantage of the midweek senior discounts, but even so, the price increases have been “extreme.” She says she doesn’t think she can afford a drug her doctor has recommended.
AARP CEO Jo Ann Jenkins called the increase in government payments “crucial for Social Security recipients and their families as they try to keep up with the rising costs.”
Policymakers say the adjustment is a guarantee to protect social security benefits against loss of purchasing power, not a pay rise for retirees. About half of the elderly live in households where Social Security provides at least 50% of their income, and a quarter depend on their monthly payment for all or almost all of their income.
“You never want to downplay the importance of COLA,” said retirement policy expert Charles Blahous, a former public administrator who helps oversee Social Security and Medicare finances. “What people can buy is very deeply affected by the number that comes out. We are talking about the necessities of life in many cases.
This year’s Social Security administrators are reporting amplified warnings about the program’s long-term financial stability. But little is said about fixes in Congress, with lawmakers consumed by President Joe Biden’s massive national legislation and partisan national debt machinations. Social Security cannot be dealt with by the budget reconciliation process Democrats are trying to use to keep Biden’s promises.
Social Security’s turn will come, said Rep. John Larson (D-Conn.), Chairman of the House Social Security subcommittee and author of legislation to address loopholes that would prevent the program from paying. all benefits in less than 15 years. His bill would increase payroll taxes while changing the COLA formula to put more weight on health care spending and other costs that weigh more heavily on seniors. Larson has said he intends to move forward next year.
“This one-off shot from COLA is not the antidote,” he said.
Although Biden’s national plan includes a major Medicare extension to cover dental, hearing and vision care, Larson said he heard from voters that seniors feel neglected by Democrats.
“In town halls and city tele-hotels, they say: ‘We are really happy with what you have done on the child tax credit, but what about us? “” Larson added. “In a midterm election, this is a very important constituency.”
COLA is only part of the annual financial equation for seniors. An announcement regarding the Medicare Part B premium they pay for outpatient care is expected shortly. It’s usually an increase, so at least part of any social security increase goes into health care. The Part B premium is now $ 148.50 per month, and the Medicare Administrators report estimated an increase of $ 10 for 2022.
Economist Marilyn Moon, who has also served as a public administrator for Social Security and Medicare, said she believes the current inflationary surge will be temporary, due to highly unusual economic circumstances.
“I think there will be an increase this year that you won’t see happening again in the future,” Moon said.
But it shouldn’t be long before policymakers get to work on retirement programs, she said.
“We are at a time when people do not respond to political needs until there is a sense of hopelessness, and Social Security and Medicare are programs that benefit from long planning. term rather than short-term machinations, ”she said. .
Social security is financed by social contributions collected from workers and their employers. Everyone pays 6.2% on wages up to a cap, which is adjusted annually for inflation. Next year, the maximum amount of income subject to Social Security payroll taxes will increase to $ 147,000.
The financing plan dates back to the 1930s, an brainchild of President Franklin D. Roosevelt, who believed that a payroll tax would foster a sense of ownership among average Americans that would protect the program from political interference.
This argument still resonates. “Social Security is my lifeline,” said Ruderman, the New York retiree. “That’s what we worked for.