Millions of Social Security seniors will see their payments increase by 5.9% in 2022. As the economy battles to shake off the drag of the coronavirus outbreak, the largest cost-of-living adjustment in 39 years follows a spike in inflation.
According to projections released Wednesday by the Social Security Administration, the COLA, or cost-of-living adjustment, equates to an extra $92 per month for the average retired worker. It’s a sharp departure from a lengthy period of low inflation, with cost-of-living increases averaging just 1.65% each year during the previous ten years.
With the increase, the average monthly Social Security payment for a retired worker is expected to rise to $1,657 next year. Benefits for a typical couple would increase by $154 per month, reaching $2,753.
But it’s only to help offset the growing expenses of food, fuel, and other products and services that beneficiaries are already paying for.
Cost-of-living hikes, according to retiree Cliff Rumsey, “went rather rapidly.” Rumsey resides on Hilton Head Island, South Carolina, after a career in sales for a major steel factory. Judy, his wife of over 60 years, has severe Alzheimer’s disease, and he cares for her at home. Rumsey said he’s noticed price hikes for payments paid to caretakers who periodically fill in for him, as well as personal care goods for Judy, since the coronavirus epidemic.
For roughly 1 in every 5 Americans, the COLA has an impact on their household budget. This comprises over 70 million individuals, including Social Security beneficiaries, handicapped veterans, and federal retirees. It will be the largest rise in the lives of baby boomers who retired within the last 15 years.
Kitty Ruderman of Queens, New York City, is one of them, having retired from a profession as an executive assistant and been receiving Social Security for over a decade. “Every year, we wait to hear what the rise will be, and it’s always so small,” she added. “Thank god, it will make a difference this year.”
Despite the fact that Ruderman schedules her food shopping to take advantage of midweek senior citizen discounts, she says the price rises have been “severe.” She claims she is unable to afford a medicine that her doctor has prescribed.
The government payout increase, according to AARP CEO Jo Ann Jenkins, is “crucial for Social Security retirees and their families as they attempt to keep up with growing expenditures.”
The change, according to policymakers, is a precaution to preserve Social Security benefits from losing buying power, not a pay raise for retirees. About half of seniors live in families where Social Security provides at least half of their income, and one-quarter rely entirely or nearly entirely on their monthly benefit.
“You never want to downplay the impact of the COLA,” said retirement policy expert Charles Blahous, a former public trustee who oversaw the finances of Social Security and Medicare. “The quantity that is released has a huge impact on what individuals are able to buy. In many situations, we’re talking about basic requirements.”
This year’s Social Security trustees report echoed previous warnings about the program’s long-term financial viability. In Congress, though, lawmakers are preoccupied with President Joe Biden’s huge domestic legislation and political intrigues over the national debt. The budget reconciliation procedure that Democrats are seeking to utilize to fulfill Biden’s pledges will not be able to handle Social Security.
Rep. John Larson, D-Conn., chairman of the House Social Security subcommittee and author of legislation to address deficiencies that would leave the program unable to pay full benefits in less than 15 years, believes his time has come. His measure would boost payroll taxes while also altering the COLA methodology to give health-care costs and other items that disproportionately affect the elderly greater weight. Larson stated that he plans to continue next year.
He stated, “This one-time dose of COLA is not the cure.”
Despite the fact that Biden’s domestic plan includes a significant increase of Medicare to include dental, hearing, and vision care, Larson said he hears from people that the Democrats are neglecting elderly.
“They’re saying at town halls and tele-town halls, ‘We’re extremely delighted with what you done on the child tax credit, but what about us?'” says one source. Larson continued. “This is a critical constituency in a midterm election.”
The COLA is simply one component of a senior’s annual financial picture. Medicare’s Part B premium, which pays for outpatient treatment, is anticipated to be announced soon. Because it’s generally an increase, health care eats up a significant portion of every Social Security gain. The Part B premium is presently $148.50 per month, with a $10 rise expected in 2022, according to the Medicare trustees’ report.
Marilyn Moon, an economist who formerly served as a public trustee for Social Security and Medicare, feels the present spike in inflation is only transitory owing to extremely exceptional economic conditions.
“I believe there will be an increase this year that will not be repeated in the future,” Moon said.
Policymakers, on the other hand, should not put off working on retirement plans, she added.
“We’ve reached a stage where people don’t react to policy requirements until they feel desperate,” she said, adding that “both Social Security and Medicare are systems that benefit from long-term planning rather than short-term manipulations.”
Social Security is funded by payroll taxes paid by both employees and employers. Each pays 6.2 percent on salaries up to a limit that is adjusted for inflation every year. The highest amount of earnings that will be subject to Social Security payroll taxes will rise to $147,000 next year.
President Franklin D. Roosevelt, who felt that a payroll tax would promote a sense of ownership among regular Americans and insulate the program from political intrusion, devised the funding system in the 1930s.
That argument is still valid. Ruderman, a New York retiree, stated, “Social Security is my lifeblood.” “It’s what we’ve been striving towards.”