By RICARDO ALONSO-ZALDIVAR and CHRISTOPHER RUGABER | The Associated Press
WASHINGTON — Millions of retirees with Social Security will receive a 5.9% increase in 2022. The biggest cost of living adjustment in 39 years follows a burst of inflation as the economy struggles to shake off the rut of the coronavirus pandemic.
The COLA, as it’s commonly called, is $92 per month for the average retired worker, according to estimates released Wednesday by the Social Security Administration. That marks an abrupt break from a long inflationary lull where cost-of-living adjustments averaged just 1.65% per year over the past 10 years.
With the increase, the estimated average Social Security benefit for a retired worker will be $1,657 per month next year. A typical couple’s benefits would increase by $154 to $2,753 per month.
“It’s moving pretty quickly,” retired Cliff Rumsey said of the rise in the cost of living he’s seen. After a career in sales for a leading steelmaker, Rumsey lives near Hilton Head Island, South Carolina. He takes care of his nearly 60-year-old wife, Judy, who has advanced Alzheimer’s disease at home. Since the coronavirus pandemic, Rumsey said he’s noticed price increases for food, wages paid to health care providers who occasionally spell him, and personal care products for Judy, not to mention energy costs.
The COLA affects the household budget for about 1 in 5 Americans. That includes Social Security recipients, disabled veterans and federal retirees, totaling nearly 70 million people. For baby boomers who have retired in the past 15 years, this will be the biggest increase they’ve seen.
“It will be welcome,” said analyst Mary Johnson of the nonpartisan advocacy group Senior Citizens League. “But what we’re hearing is that even with the COLA, purchasing power will still be eroded as the price hikes continue to ramp up.”
Policymakers say the COLA was designed as a safeguard to protect Social Security benefits from the loss of purchasing power in an ever-changing economy, not as a pay rise for retirees. About half of seniors live in households where Social Security benefits make up at least 50% of their income, and a quarter depend on their monthly payment for all or almost all of their income.
“Regardless of the size of the COLA, you never want to minimize the importance of the COLA,” said Charles Blahous, a retirement policy expert, a former public trustee who oversees Social Security and Medicare finances. “What people can buy is very much influenced by the amount that comes out. In many cases we are talking about the necessities of life.”
This year’s Social Security trustees report heightened warnings about the program’s long-term financial stability, but little talk of solutions in Congress, with the attention of lawmakers swallowed by President Joe’s massive domestic agenda legislation Biden and partisan machinations over the national debt. Social Security cannot be addressed through the fiscal reconciliation process Democrats are trying to use to deliver on Biden’s promises.
But Social Security’s turn will come, said Rep. John Larson, D-Conn., chairman of the House Social Security Subcommittee and author of legislation to address impending deficiencies that would prevent the program from paying full benefits in less than 15 years. His bill would increase payroll taxes while changing the COLA formula to give more weight to health care spending and other costs that weigh more heavily on the elderly. Larson said he plans to continue next year.
“This one-time injection of COLA is not the antidote,” he said.
While Biden’s domestic package includes a major expansion of Medicare for dental, hearing and vision care, Larson said he hears from voters that seniors feel neglected by Democrats.
“In town halls and tele-town halls, they say, ‘We’re really happy with what you’ve done with the tax relief for children, but what about us?'” Larson added. “In by-elections, this is a very important constituency.”
The COLA is just one part of the annual financial comparison for seniors. An announcement about Medicare’s Part B premium for outpatient care is expected soon. It’s usually a raise, so at least some of the Social Security raise goes to health care. The Part B premium is now $148.50 per month, and the Medicare administrators’ report estimated an increase of $10 for 2022.
Economist Marilyn Moon, who also served as public trustee for Social Security and health care, said she believes the current inflation spurt is an adjustment to highly unusual economic conditions and that the pattern of price restraint will recover over time.
“I think there’s going to be an increase this year that you won’t see in the future,” Moon said.
Policy makers should not delay getting started with retirement programs.
“We’re at a point in time where people don’t respond to policy needs until there’s a sense of desperation, and both Social Security and Medicare are programs that take advantage of long-term planning and short-term machinations,” she said. .