Though Social Security has been around for a very long time, the program continues to evolve. One positive change that may arise in the near future is a generous cost-of-living adjustment or COLA.
COLAs are annual raises that seniors on Social Security are entitled to. They’re not always guaranteed since there have been years when seniors have gotten no boost to their benefits.
But 2022’s COLA might be Social Security’s most prominent in decades. Here’s what seniors should be prepared for. Recently, COLAs haven’t been much to write about. In 2021, seniors saw benefits increase by 1.3% and in 2020 by 1.6%. Next year, seniors might see their incomes rise substantially. The reason being Social Security increases are tied to inflation. Data shows that benefits may rise by 6% or more in 2022.
If you’re wondering why we don’t have an exact estimate, it’s because COLAs are calculated based on the third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Worker, aka CPI-W. For now, we have data from July and August, but we’re missing September’s data. This info should be coming out shortly. Once September’s data is out, we’ll have an exact number that seniors can expect in 2022.
Some seniors may not be used to a generous COLA. At first glance, a 6% COLA might seem like good news. Yet, it’s important to remember that the reason next year’s COLA has gone up is that the cost of living has also increased for all American citizens.
Some of these cost increases may be hurting workers more than seniors. For example, gas-price increases are more likely to hit commuters’ wallets than retirees’. But, food costs and other rising expenses can hurt Social Security recipients. While a good COLA can help, ultimately, seniors may not benefit enough financially.
Once 2022’s COLA is announced, we’ll still need another piece of the puzzle; that’s Medicare Part B premium details. Every year, there’s a standard premium that seniors must pay for coverage on a monthly basis. Right now, it’s $148.50. But, in the future, that premium could rise, thereby eating into seniors’ COLA.