Rising consumer costs have helped push the latest Social Security cost-of-living adjustment estimate to 5.3% next year.
Whether that will actually be the bump that retirees will make for their monthly checks in 2022 depends a lot on the economy, including whether the Federal Reserve decides to raise interest rates.
The 5.3% estimate was calculated by The Senior Citizens League, an unbiased senior citizen group, based on data from the Bureau of Labor Statistics’ consumer price index through May.
If that amount went through, it would be the highest annual adjustment since 2009, when benefits saw a 5.8% increase.
In 2021, Social Security beneficiaries received a 1.3% increase in their monthly checks.
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The Senior Citizens League previously estimated the COLA could be 4.7% for 2022, based on data as of April.
Social Security’s annual cost-of-living adjustment is calculated based on the Consumer Price Index for Urban Wages and Employees, or CPI-W. There are still four months of data before the official estimate for next year is set.
The month-to-month rise in the Senior Citizens League’s estimate is due to rising costs driven by inflation, according to Mary Johnson, social security and health care policy analyst at the Senior Citizens League.
The price of gasoline saw the biggest increase, rising 56.2% from May 2020 to May 2021.
Used car and truck prices rose 29.7% over that one-year period.
Other daily items also saw a price increase. Bacon was up 13%, citrus up 9% and milk up 7.2%.
However, not everything went up. For example, the cost of ground beef fell by 5.8%.
How those prices develop in the coming months — and whether the cost of living adjustment stays the same, rises or falls next year — depends on those consumer costs.
Any action by the Federal Reserve could change the trajectory of those prices. Although the Federal Open Market Committee is meeting this week, the central bank is not expected to announce any changes. However, it could indicate how it feels about its plans for the future.
“A lot will depend on what happens next,” Johnson said. “If they announce that they will raise interest rates, it will be very interesting to see how that would affect COLA.”