Social Security recipients could be looking at a 6.2% cost of living adjustment next year, the highest increase in nearly four decades, according to The Senior Citizens League.
“The estimate is significant because the COLA is based on the average of the July, August and September CPI (Consumer Price Index) data,” said Mary Johnson, a Social Security policy analyst for the nonpartisan group.
“With one third of the data needed to calculate the COLA already in, it increasingly appears that the COLA for 2022 will be the highest paid since 1983 when it was 7.4%.”
The organization in a statement on its website said 2021 Social Security recipients saw their benefits increased by just 1.3%. Fox Business noted benefits increased by 1.6% in 2020.
Cost of living adjustments are put in place to balance out the impact of inflation and a formula is used each year by the Social Security Administration to base the COLA figure.
“Social Security benefits are one of the few types of income in retirement adjusted for inflation,” the senior citizens group said on its website.
“But soaring inflation can still knock a hole in the household finances of retired and disabled Social Security recipients. In 2021 Social Security benefits increased by just 1.3 percent raising the average benefit by about $20. But about 86 percent of Social Security recipients say their expenses increased by much more than that amount.
“The Consumer Price Index that’s used to make the annual inflation adjustment can make a difference in the amount of Social Security income that beneficiaries receive over time. Under current law, Social Security benefits are adjusted using an index that measures inflation experienced by younger working adults, the Consumer Price Index for Urban Wage Earners and Clerical Workers but does not include the spending patterns of households with retirees age 62 and older.
“Because this index surveys the spending patterns of younger working adults, it is weighted more heavily for gasoline, which is up 41.8 percent over the past 12 months and driving the steep rise in the COLA. But in 2020 and most of the past 12 years, gasoline prices have been in steep decline. COLAs have averaged just 1.4%.”
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