The last decade has not been particularly kind to the wallets of those who depend on Social Security to keep their financial lives on track.
Annual cost-of-living allowances (COLA) failed to keep up with inflation, meaning the monthly Social Security benefit of 2021 doesn’t pack the same buying power as the one from, say, 2011.
But perhaps help is on the way.
Social Security recipients could see an upward adjustment of over six percent in 2022, a raise that comes none too soon. That significant bump in the electronic payments that find their way to recipients’ bank accounts could provide some “catch up” for those who saw their annual increases keep coming in below what inflation was doing to the value of the dollar.
Getting Social Security back on pace to keep ahead of inflation is critical for seniors trying to keep their financial heads above water. Compounding many people’s struggles is the fact that low interest rates have also prevented them from getting any kind of decent returns for savings they may have put away in money management accounts, CDs or bonds, which also have not kept up with the pace of inflation.
For years Social Security recipients watched with chagrin as their thin annual increases lost that continuing battle with inflation. Since 2010, their monthly payments have been adjusted nine out of 11 years at an average rate of 1.6 percent. In those same years the cost of living rose an average of about two percent annually. So, with each year, the gap grew a little more.
The 2022 increase will go a long way towards helping seniors make up for over a decade of living underwater. How is it decided when and if there’s an increase in Social Security benefits? The announcement will come in October with any adjustment effective in January. It’s based on what’s happening with the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W. That index measures the monthly price change in a market basket of goods and services, including food, energy and medical care.
Roughly 65 million Americans receive a Social Security benefit each month, according to the Social Security Administration. About 75 percent of those are retirees and their dependents, but benefits also go to disabled workers and the survivors of deceased workers.
Based on the numbers, those monthly electronic payments are critical for millions of aging Americans. Social Security benefits represent about 33 percent of the income for those 65 and over, and for some individuals Social Security accounts for 90 percent or more of their income. That’s why those low monthly increases have been especially disheartening for many retirees who are struggling just to pay their bills.
For seniors to start getting ahead of the never-ending march of inflation, a COLA increase based on economic reality will be a sea-change from what they have experienced over the last decade—and not a moment too soon.