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Retired Americans who collect Social Security are about to get the biggest “raise” in 41 years: A 5.9% increase in their monthly payments starting in January.
The biggest increase in the cost-of-living adjustment for Social Security since 1981 is a bit of a double-edged sword, though. It going up so much because U.S. inflation is running at the highest rate in at least a decade or more.
Consumer prices have climbed 5.4% in the 12 months ended in September.
If inflation tapers off next year, as the Federal Reserve predicts, seniors could get a small windfall. Yet if inflation remains high they won’t benefit nearly as much.
Read: High inflation to last awhile, Fed’s Bostic says, and it’s no longer ‘transitory’
Cost-of-living adjustments are based on formula tied to the consumer price index. The government made it official after the release of September CPI report.
The average Social Security beneficiary receives about $1,543 a month this year. The scheduled 5.9% increase in 2022 would amount to $91 a month — or $1,092 over a full year.
Benefits rose just 1.3% in each of the prior two years, but inflation was also a lot lower. The annual COLA increase is meant to help seniors keep up with inflation.
Nearly 70 million people received Social Security or related benefits in 2021. That’s about one-fifth of the overall population.
Read: What you probably don’t know about Social Security
The annual cost of living increase is determined by taking the average rate of inflation from July through September and comparing it the same three-month period a year earlier, using an index known as the CPI-W.
