Social Security recipients have known for a long time that they might be getting the biggest cost-of-living increase in decades next year, and that’s still the case following the latest estimate.
On Tuesday, The Senior Citizens League (TSCL), a nonpartisan seniors advocacy group, projected that the Social Security Cost of Living Adjustment (COLA) for 2022 will be 6% to 6.1% based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That projection is down slightly from the previous month’s estimate of 6.2%, but would still represent the biggest COLA increase since 1982.
The forecast is based on CPI data through August, according to a statement from the TSCL. There’s still one more month of consumer price data to come in before the official COLA announcement in October.
“This year is particularly difficult to forecast with certainty,” said Mary Johnson, Social Security policy analyst for The Senior Citizens League. “The inflation patterns caused in large part due to the COVID-19 pandemic were unprecedented in my experience. Price changes due to climate disasters throw a monkey wrench into things on top of the difficulty in watching run up in costs earlier this year.”
Sharp COLA increases typically happen during periods of high inflation. This hasn’t been much of a problem in recent years. As previously reported on GOBankingRates, the U.S. economy has been operating at near-zero inflation for the better part of the last decade. That included the price of gasoline, which the Social Security Administration keeps a close watch on.
But this year, gas prices have been on a steep increase, which accounts for a large part of the projected COLA increase. Not everyone agrees with putting such a big emphasis on gas prices, however. Gas prices usually impact younger consumers more than older ones. As people age, they tend to spend more on housing and medical costs, which is one reason some advocates want to see a bigger focus on those costs when determining COLA increases.
No matter the increase, chances are it won’t make a huge impact on the amount of money Social Security recipients have at the end of the month. Most, if not all, of the extra funds will likely be swallowed up by inflation, according to The Motley Fool financial site — not just in the form of higher living expenses, but also in terms of higher medical expenses, Medicare Part B premiums and housing costs.
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