Valerie Macon / AFP / Getty Images
Text size
When Social Security announces its cost-of-living adjustment in 2022 later this year, beneficiaries are likely to get the highest percentage in 40 years thanks to inflation that has risen amid the recovery from the pandemic.
With inflation reduced in 2020, Social Security beneficiaries received a 1.3% increase in January, which was an estimated average increase in benefits of about $ 20 a month, according to the Senior Citizens League , a non-party senior advocacy group.
But the government’s measure of inflation used to determine the cost-of-living adjustment, or COLA, has risen over the past year and the Elderly League now predicts a COLA of 6.2% for 2022 payments. This would lead to an increase of $ 96.40 per month for those receiving the average monthly payment of about $ 1,555.
“With a third of the data needed to calculate COLA already appearing, it increasingly looks like COLA will be the highest paid since 1982, when it was 7.4%,” says Mary Johnson, a Social Security policy analyst and Medicare for the Elderly League.
For its part, Moody’s Analytics estimates that the 2022 COLA will be 4.6% and will even go down next year, as inflation moderates. Rising inflation in recent months is a reflection of the fading pandemic, according to Mark Zandi, chief economist at Moody’s Analytics. “At this time of year, these supply-related issues will certainly be resolved, supply will increase and demand will moderate,” he says. “I have a feeling the COLA adjustment for 2023 will probably be 2.5%.”
Since 1975, COLAs are automatic; before, the legislation fixed the increases. The adjustment is now determined by applying the percentage increase, if any, in the Department of Labor’s consumer price index for urban wage earners and office workers, or CPI-W, for the third quarter of the year. prior to the third quarter of the current academic year. The index is a measure of the monthly change in prices in a basket of market goods and services, including food, energy, and health care. Generally, any adjustment is announced in October and starts paying in January.
Since 2000, Social Security benefits have lost 30% of their purchasing power, according to inflation until March, according to a survey by the League of the Elderly.
For many Social Security beneficiaries, much of the increase in benefits over the past decade has been consumed by rising Medicare Part B premiums, says David Certner, legislative counsel and director of legislative policy for to AARP government matters. Most Medicare members have Medicare Part B premiums, which cover doctor visits and other types of outpatient care, deducted from their Social Security payments.
Last year, the increase in the Medicare Part B premium was limited by a federal spending bill to 25% of what it would have been otherwise. The standard Part B premium, which is what most people pay, for 2021 is $ 148.50 per month, down less than $ 4 from $ 144.60 per month in 2020. Not yet estimates no change in this year’s premium.
“The thinking is that we may be in for a bigger increase in Part B premiums in 2022 than we’ve seen in the past,” Johnson says.
Some are calling for a change in the way COLA is calculated, which they say would increase Social Security benefits. The 2021 Fair COLA for Seniors Act, a bill introduced in Congress in July, calls for calculating the adjustment based on changes in the consumer price index for the elderly, or CPI-E, rather than the ‘IPC-W. The CPI-E better reflects the real increase in costs for the elderly, as it weighs more on items that seniors normally spend, such as health care, according to advocates.
In most years, a COLA calculated using changes in the CPI-E would be moderately higher than a COLA that reflects changes in the CPI-W, Johnson says. However, with currently available data, the use of the CPI-E to project the COLA payable in 2022 would result in a 5% increase, lower than the projection reflecting the CPI-W, according to her. This is because the CPI-W has a higher weighting for gasoline prices, which are high this year, she says. The 2017 COLA of 0.3% would have been 1.5% if the CPI-E had been used, Johnson says.
Write to [email protected]