Seniors who depend on Social Security are about to experience their biggest benefit increase since 1982.
On October 13, the Social Security Administration announced a cost-of-living adjustment of 5.9% for 2022. The boost adds $92 to monthly benefit payments to the 70 million Americans who rely on Social Security, including retirees and disabled citizens.
The annual increase is more than four times the 2021 adjustment, which added $20 to monthly payments, amounting to a 1.3% increase last year.
The increase is a response to the new reality of consumer prices as part of the global recovery from the COVID-19 pandemic. The Consumer Price Index for all items rose 5.4% in the 12 months ending in September 2021, with the most significant increase occurring from March through June as the American economy gathered steam.
The 5.9% adjustment recognizes notable price increases in consumer goods and services that are important to most Social Security beneficiaries: gasoline, restaurants, appliances, car insurance, air travel, and hotel stays, among others.
Additionally, new car prices have shot up 41% in the past year due to production slowdowns stemming from the semiconductor shortage.
Social Security increases correspond to changes in the Cost-of-Living Adjustment (COLA) as dictated by the Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers. This CPI tracks the change between average national prices for goods between the third quarters of two given consecutive years.
When prices don’t increase, the COLA equals zero. This has been the case in three years since 1976, the year after Congress gave the green light to automatic annual COLA adjustments.
The COLA hit zero in 2010 and 2011 as the Great Recession thwarted the American economy. It hit zero again in 2016.
The COLA’s all-time annual highs came in 1981 and 1982 when it hit 14.3% and 11.2% respectively. In the years since, the COLA has not topped 5.8% until now. The annual benchmark has not topped 3% since 2012.
The 5.9% jump in 2022 addresses criticisms from advocacy groups who say annual increases have not sufficiently kept up with rising costs. Falling prices in most consumer goods (especially gasoline) in the 12 years before the COVID-19 pandemic plateaued the COLA at very low levels.
Since 2000, Social Security benefits have increased by 55%, but overall living expenses for seniors have gone up by nearly twice that rate, reaching 105%.
Those realities have hit home with those who depend on Social Security benefit payments for living. The Social Security Administration says that its benefits equal about 30% of the elderly population’s income, with roughly 40% of all beneficiaries getting at least half of their total income from Social Security benefits.