With inflation surging in the U.S., Americans on Social Security could receive a significant pay increase next year.
Each year, seniors’ monthly benefit is adjusted to account for inflation. In the last two decades, as inflation has largely been absent from the economy, the monthly payment has risen only slightly. In 2021, the increase was 1.2%. That could change in 2022.
The Senior Citizens League has calculated next year’s cost of living adjustment (COLA) and projects that Social Security benefits will increase by 6.1%. It would be the biggest increase since 1983, an era when inflation was increasing at double-digit rates.
The COLA is based on the Consumer Price Index (CPI) for Urban Consumers in July, August, and September. It’s also heavily weighted for the price of gasoline, which has risen sharply in recent months. The COLA will be announced in October, and the first adjusted benefit payment will be made in January.
Changing the formula
Meanwhile, there’s a move in Congress to change the way the benefits COLA is formulated, and that could increase benefit payments to seniors even more. Last week, Rep. John Garamendi (D-Calif.) introduced a measure to base benefit increases on the cost of things seniors use most, such as health care.
“Seniors and disabled citizens rely on Social Security benefits for a large portion of their income, and it’s about time for Social Security benefits to reflect their lifestyles,” Garamendi said. “Using a COLA that actually reflects how retirees spend their money – especially in health care – is a no-brainer that will increase benefits and make Social Security work better for the people it serves.”
Garamendi’s bill has already attracted broad support, with 23 original co-sponsorships and senior advocacy groups urging its passage. Nancy Altman, President of Social Security Works, supports the change, saying the current way inflation is measured doesn’t reflect the rapidly rising costs of prescription drugs.
“By more accurately accounting for the costs faced by Social Security beneficiaries, this legislation better prevents the erosion over time of Social Security’s modest but vital earned benefits,” she said.