Social Security Benefits: Are SS Payments Affected by Inflation? – Community News
Social Security

Social Security Benefits: Are SS Payments Affected by Inflation?

Adjustment of the cost of living (COLA) payments are set to increase by 5.9 percent in the United States in 2022, with nearly 70 million Americans receiving the payments.

Payments will begin in January 2022 to more than 64 million beneficiaries, while they will begin on December 30 to approximately eight million people.

The maximum amount of income under the Social Security tax will be raised to $147,000, while the income limit for employees under full retirement age will be raised to $19,560. The income limit for people who will reach full retirement age in 2022 will be raised to $51,960.

Are Social Security Benefits Affected by Inflation?

In short, yes they are. Benefits are adjusted upwards for the effects of inflation, and this increase in Social Security’s cost of living is known as COLA. The Social Security Administration decides each year whether the following year’s benefits include COLA and, if so, how much.

Social Security benefits have not always adjusted to inflation, and that only started in the 1970s.

How is COLA determined?

Social Security recipients don’t necessarily receive automatic COLA increases every year. instead, COLA is based on the Consumer Price Index for Urban Wages and Employees (CPI-W), as calculated by the Bureau of Labor Statistics.

The CPI-W measures what average-income workers pay for merchandise for resale, and when that increases by more than 0.1% between the third quarter of consecutive years, the SSA adds COLA to Social Security benefits.

The benefits increase by the same amount as the index. When the CPI-W is negative, no COLA is received by Social Security recipients.