Millions of retirees on Social Security will get a 5.9% increase in benefits for 2022. It will be the largest Cost of Living Adjustment (COLA) in 40 years, when in 1982 it was 7.4%. As the economy struggles to recover from the coronavirus pandemic, a jump in inflation has prompted the increase for millions on Social Security in 2022.
That marks an abrupt shift from a long lull in inflation as for more than a decade, the adjustments have averaged 1.54% per year. In many cases the COLA has done little, or nothing, in instances when their expenses have risen dramatically, but their benefit checks have barely adjusted for inflation.
This larger increase follows a burst in inflation as the economy struggles to recover from the effects of the coronavirus pandemic over the last two years. But the increase is still modest.
The COLA will amount to about $92 per month for the average retired worker, according to estimates released Wednesday by the Social Security Administration. With it, the average social security payment for a retiree will be $1,657 a month, and a typical couple’s benefits would increase by $154 a month to $2753 per month.
The boost is to help make up for rising costs that recipients are already paying for food, gasoline and other goods and services as a result of the pandemic. For baby boomers who embarked on retirement within the past 15 year, it will be the largest increase they’ve seen.
The COLA affects household budgets for about 1 in 5 Americans, including social security recipients, disabled veterans and federal retirees, or almost 70 million people.
What people are able to purchase is very profoundly affected by COLA. We are talking the necessities of living in many cases. About 50% of seniors depend on social security benefits for at least half of their income, and 25% rely on their monthly payment for all or nearly all of their income.
Social Security benefits are linked to the Consumer Price Index for urban workers, which weights in the average prices of goods used by workers younger than retirement age (such as gas).
AARP CEO Jo Ann Jenkins called the government payout increase “crucial for Social Security beneficiaries and their families as they try to keep up with rising costs.”