As inflation grips the U.S. economy, Social Security recipients are getting the largest cost-of-living adjustment in 39 years.
Social Security benefits will rise by 5.9 percent in 2022, the Associated Press reports, or $92 per month for the average retired worker.
That works out to an average Social Security payment of $1,657 per month next year.
With Inflation, Social Security Payments Are Covering Less and Less
AARP CEO Jo Ann Jenkins told the AP the cost-of-living adjustment, or COLA, is “crucial for Social Security beneficiaries and their families as they try to keep up with rising costs.”
For roughly half of seniors, Social Security benefits make up at least 50 percent of their income. And for one quarter of seniors, the monthly payment is basically all the income they have.
“Regardless of the size of the COLA, you never want to minimize the importance of the COLA,” retirement policy expert Charles Blahous told the AP. Blahous is a former public trustee who oversaw Social Security and Medicare finances. “What people are able to purchase is very profoundly affected by the number that comes out. We are talking the necessities of living in many cases.”
Meanwhile, retirees told the AP that they were skimping on basic necessities, including medicine. And they’re stretching their Social Security payments as far as they’ll go.
“It goes pretty quickly,” Cliff Rumsey said of previous COLA raises. The retiree, who lives near Hilton Head Island, South Carolina, has to pay for his own expenses and that of his wife, Judy, who has advanced Alzheimer’s disease.
Financial Sustainability of the Program Is In Doubt
The recent Social Security trustees report found that the program is going to run out of money sooner than anticipated. It also found that the COVID-19 pandemic has dented the program’s finances.
Unfortunately for current retirees and those hoping to retire someday, lawmakers are currently fixated on President Biden’s sprawling domestic legislative agenda. Democrats, such as Rep. John Larson (D-CN), have called for raising payroll taxes on workers. That’s a controversial move with inflation hammering household budgets.
“We’re at a point in time where people don’t react to policy needs until there is a sense of desperation,” economist Marilyn Moon, a former public trustee for Social Security and Medicare, told the AP. “And both Social Security and Medicare are programs that benefit from long-range planning rather short-range machinations.”
In the U.S., lawmakers have resorted to taxes on middle-class workers to fund Social Security. In 2022, the maximum amount of earnings subject to payroll taxes will be $147,000.