Jul 14, 2021,03:30pm EDT|120,991 views
How Big Will The Social Security Cost-Of-Living Adjustment Be For 2022
David RaeContributorPersonal FinanceCFP who writes about having a Wealthier Healthier and Happier Life.Follow
The pain of inflation is often harshest on the budgets of retirees on fixed incomes. The only bright light of the recent spike in the consumer price index is the potential for a more significant Social Security cost-of-living adjustment (COLA) this year. Estimates of the Social Security COLA in 2021 (for 2022) have been in the range of 5.3 to 6.1%. We have not seen a cost-of-living adjustment at this level since 2009.
The 2021 Social Security cost-of-living adjustment will not kick in until January 2022. So, retirees may see their budgets stretched thin over the next six months. Rental prices are jumping; groceries are costing more, real estate prices have gone crazy don’t even get me started on health care and long-term care.
The 5.3% Social Security COLA estimate was calculated by The Senior Citizens League, a non-partisan senior group, and based on consumer price index data from the Bureau of Labor Statistics through May. In June, the group updated its estimate to 6.1%, which would be the biggest Social Security COLA since 1983.
The last time a Social Security cost-of-living adjustment was more than five percent was in 2009. Sadly, that jump in benefits was followed by two years of no increases in Social Security benefits. The 2020 COLA for Social Security increased 2021 SS benefits by just 1.3%.MORE FROM FORBES5 Biggest Social Security Mistakes To Avoid In 2021By David RaeMORE FOR YOUDid You Get A Second Stimulus Check Today? Here’s WhyTrump Signs Executive Orders To Extend COVID-19 Economic Relief, Includes Unemployment Benefits, Eviction MoratoriumBiden: Stimulus Bill Passed During Lame Duck Session Is ‘At Best Just A Start’
The Social Security Administration typically announces the annual Social Security COLA rate during the month of October. The SS COLA is based on the average rate of inflation over the prior three months. Depending on who you ask, we could see an acceleration of the inflation rate, or price pressures could begin to recede. Don’t go out and make major spending choices based on a potentially high Social Security COLA. I am optimistic inflation will return to closer to normal levels over the long term. In the short-term, there is so much pent-up demand (due in part to people being stuck at home during COVID); therefore many areas of the economy will most likely continue to have increased prices.
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