Retirees Rejoice: Social Security’s 5.9% Cost-of-Living Increase Is Biggest in 40 Years
Retirees are poised to benefit from the largest increase in Social Security benefits in the last 40 years.
Every October, the Social Security Administration announces a cost-of-living adjustment (COLA) that directly impacts retirees’ payments for the coming year.
Approximately 70 million Americans receive Social Security benefits, which accounts for about a third of most retirees’ income. But for around a quarter of retirees, these benefits provide 90% or more of their total income.
After the economic turmoil of 2020, retirees saw a modest 1.3% increase in 2021. For the average payment, this translated to an additional $20 per person. By comparison, retirees receiving an average monthly check of $1,565 will see a $92 boost, bumping their monthly payments to $1,657 for 2022.
This year’s 5.9% increase is a welcomed change in recent COLA trends for retirees and is tied directly to inflation caused by the COVID-19 pandemic.
How is the 2022 COLA determined?
The COLA for SS benefits is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). To determine this adjustment, the SSA compares changes to the average CPI-W index between July, August and September of the previous year (2020) to those same three months of the current year (2021). The percentage change between the two years determines the COLA for the following year.
Everyone buying and selling products and services in the U.S. knows that the prices for consumer goods have increased significantly over the past year.