2022 Social Security COLA estimate rising again – Community News
Social Security

2022 Social Security COLA estimate rising again

Based on new data for July, it’s beginning to look like Social Security’s annual cost-of-living adjustment will be the highest in nearly four decades next year.

New, updated estimates from The Senior Citizens League (TSCL) show annual COLA could be 6.2% next year, based on July Consumer Price Index (CPI) data released by the Bureau of Labor on Aug. 11. Statistics have been released.

According to data from the BLS, the consumer price index for all urban consumers (CPI-U) rose 0.5% on a seasonal basis in July, after rising 0.9% in June. Over the past 12 months, the index for all items is up 5.4% before seasonal adjustment. In addition, the consumer price index for urban wage earners and white-collar workers (CPI-W) — which is used for Social Security’s COLA — is up 6% in the past 12 months. For the month, the index was up 0.5% before seasonal adjustment.

“The estimate is significant because the COLA is based on the average of July, August and September CPI data,” said Mary Johnson, social security policy analyst for The Senior Citizens League. “With a third of the data needed to calculate the COLA already in, it seems increasingly likely that the COLA for 2022 will be the highest paid since 1983, when it was 7.4%,” Johnson added. .

In comparison, the Social Security COLA for Monthly Social Security and Supplemental Income Income (SSI) increased by 1.3% in 2021, 1.6% in 2020, and 2.8% in 2019. Social Security benefits are one of the few types of income that comes with retirement are adjusted for inflation.

Last month, TSCL predicted that Social Security recipients could receive a 6.1% COLA by 2022, and in May, the organization predicted that recipients would receive a 4.7% COLA, which would be the highest increase since 2009.

Each October, the Social Security Administration announces the annual COLA for the year, which is an early precursor to what can be expected for COLAs in terms of retirement contributions and benefit limits.

What is driving the rise?

TSCL explains that under current law, Social Security benefits are adjusted using the CPI-W. That index measures inflation experienced by younger working adults, but does not take into account the spending patterns of retired households aged 62 and older.

For example, the organization notes that the CPI-W is weighted more heavily for gasoline, which is up 41.8% in the past 12 months, thus driving the sharp rise in COLA. However, in 2020 and for most of the past 12 years, gasoline prices have fallen sharply, so COLAs averaged just 1.4%.

By advocating the use of a different index, TSCL argues that retirees and disabled Social Security beneficiaries spend their money differently than younger workers, spending more on health care and housing. The organization further notes that these categories have increased faster than gasoline in recent years, but have not shown as higher COLAs because the CPI-W weighs less on them.

Legislation that would link COLAs to an index that measures inflation experienced by older households, the Consumer Price Index for the Elderly (CPI-E), was recently reintroduced. Typically, the CPI-E tends to grow faster than the CPI-W in most, but not every year. “2021 is one of those times when gasoline prices are rising and the CPI-W would yield the higher COLA,” Johnson notes.

The August 2021 CPI is scheduled to be released on September 14, which will provide even more clarity on what the 2022 COLA will be.