Retirees and disabled people are due for a 6 to 6.1 percent hike in their Social Security payments next year. The projected increase is due to a pandemic-related jump in inflation.
That significant raise comes as the program’s trustees have been warning the funds for retirees, people with disabilities and Medicare will run dry sooner than expected thanks to the recession caused by the pandemic, which led to a drop in payroll tax revenue.
The Social Security Administration (SSA) will announce its cost-of-living adjustment for 2022 next month. But according to the Senior Citizen League, the 68 million people who draw benefits have the biggest adjustment since 1982 in store for them, USA Today reports.
Predicted Social Security Increase Based on CPI-W
The SSA makes its cost-of-living adjustment based on the average annual increase in the consumer price index for urban wage earners and clerical workers, known as the CPI-W, from July to September. The CPI-W mostly tracks the Labor Department’s broader monthly consumer price index (CPI).
The Senior Citizens League is projecting a 6 to 6.1 percent increase based on the changes in the CPI-W this past year.
Overall prices spiked 5.4 percent year-over-year in both June and July. That’s the highest inflation has climbed in 13 years.
But Federal Reserve officials have claimed the price hikes are temporary. And inflation dipped to 5.3 percent in August. That makes the CPI-W tougher to predict.
Still, the Senior Citizens League told USA Today they don’t expect the Social Security adjustment to come in below 5.9 percent at the lowest. Policy analyst Mary Johnson noted that high gasoline and transportation costs have already nudged up the CPI.
“That works to the advantage of retired and disabled beneficiaries for the [cost-of-living adjustment] payable in January 2022,” Johnson said. “That has not been the case for many of the past 12 years when cheap gasoline, and other falling prices dragged down the COLA.”
Advocates for Elderly Call for Changes to Adjustment, Bigger Increases
Johnson argued that the CPI is a better indicator of seniors’ spending needs. After all, they spend less on gas, consumer electronics and other goods. And those take up a significant portion of young workers’ budgets.
Instead of basing its cost-of-living adjustment on CPI-W, Johnson said, the SSA should weight their adjustment more heavily toward food, housing and especially medical expenses. Those tend to be pricier for seniors. And those expenses have risen more steeply. So if they were factored into SSA’s adjustments, seniors would be getting an even bigger pay raise.
Left unanswered, of course, is the question of what happens when Social Security funds run out of money – especially as that likelihood draws nearer on the horizon.