Social Security Benefits Set for Biggest Boost in Decades
Social Security benefits will increase by 5.9% in 2022, the largest increase since 1982, the Social Security Administration announced Wednesday.
“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, told CNN.
The cost-of-living adjustment will affect about 70 million people overall, including 64 million retirees and 8 million Supplemental Security Income recipients. (Some beneficiaries receive payments from both programs.)
The adjustment 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.
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 that 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 that have been larger and lasted longer than many economists predicted in the wake of the coronavirus pandemic.
The Labor Department said Wednesday that the consumer price index rose by 0.4% on a monthly basis in September, and 5.4% on an annual basis. That means that much if not all of the Social Security adjustment will be claimed by higher prices for all kinds of goods, from gasoline to groceries.
The annual increase in 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 some advocates say the government program has failed to do that over the years, in part because of inaccurate inflation measures.
“This is welcome but inadequate — health care and prescription drug costs have been going up way faster than seniors’ cost of living,” Nancy Altman, co-director of the advocacy group Social Security Works, told The Washington Post. “People’s Social Security benefits have been eroding for decades, and will continue to erode even with this increase.”
Raising the long-term cost: Higher benefit payments will put additional pressure on the Social Security trust funds. The Old-Age and Survivors Insurance Trust Fund, which provides benefits for retirees, is currently projected to deplete its reserves in 2034, at which point recipients will see a 22% cut in benefits, assuming Congress doesn’t act before then.
Anqi Chen of Boston College’s Center for Retirement Research told The Wall Street Journal that the latest upward adjustment could move the depletion date forward by about three months, though much depends on how wages keep up with inflation.
“If wages are not increasing at the same rate as inflation in a given year, then what’s going in is going to be increasing less than what’s going out in benefits,” Chen said. “That’s when you get the mismatch.”