Social Security benefits, which tens of millions of U.S. retirees rely on to pay their bills, will increase 5.9% in 2022, the Social Security Administration said on Wednesday. This is the biggest increase in 40 years as food, car and rent prices continue to climb.
The increase, known as the cost-of-living adjustment, is the largest since 1982, when the adjustment was 7.4%, according to administration data. This is a sharp break from a long lull in inflation that has seen cost-of-living adjustments averaging only 1.65% per year over the past 10 years.
The average benefit – 70 million Americans receive them – would climb to $ 1,657 per month, up $ 92 from this year; the benefits for a typical couple would increase by $ 154, to reach $ 2,753 per month.
The adjustment is a response to consumer prices in the United States which have jumped at their fastest pace in years. It is linked to the Ministry of Labor’s consumer price index, which rose 5.4% in September from the previous year. Policymakers say the adjustment is a guarantee to protect social security benefits against loss of purchasing power, not a pay rise for retirees.
Inflation has accelerated this year as the global economy recovers from lockdowns caused by the pandemic. Initially, the price hikes were fueled by rebounding air fares, restaurant meals and other items whose demand collapsed in 2020. More recently, product shortages and supply chain issues supply added to the gains.
Consumer price index data released on Wednesday showed prices jumped more than expected last month. Housing prices have firmed and food – especially meat and eggs – is costing consumers more.
The maximum amount of a worker’s income subject to Social Security tax will also increase from $ 142,800 to $ 147,000, the administration said.
For many people who collect Social Security, the monthly check represents a significant portion of their annual income. Among the beneficiaries, 37% of men and 42% of women receive at least half of their income from Social Security, according to an administration file. Twelve percent of men and 15% of women rely on checks for at least 90% of their income.
Older Americans, people with disabilities, children and spouses of deceased beneficiaries depend on benefits to pay for basic necessities, including food, shelter, and utility bills. While some have said they welcome the increase in benefits, they are also concerned that it will not be enough to offset inflation and rising health insurance costs. Medicare Part B premiums, which cover medical visits and outpatient care, are deducted from Social Security checks.
Almost nine in ten people aged 65 and over were receiving benefits at the end of last year.
Jo Ann Jenkins, CEO of AARP, said the increase was needed to keep families and beneficiaries up to speed.
“The guaranteed benefits provided by Social Security and the increase in COLA are more critical than ever as millions of Americans continue to face the health and economic impacts of the pandemic,” Jenkins said in a statement Wednesday.
Nancy Altman, president of Social Security Works, an advocacy group, said she welcomed the increase, but older people were not enough to meet rising healthcare and drug costs on prescription.
“You’re happy to have a 5.9% increase, but you don’t feel like you have 5.9% when all of your other costs go up a lot more,” Altman said.
Cecilia Dominguez, who is 68 and lives in Los Angeles, said the increase in benefits would help pay for her mortgage, groceries and gas expenses. Benefits represent about 75% of her monthly income, she said. Although she retired from her purchasing manager role in 2009, she now works three part-time jobs to deal with her bills.
Dominguez said she had noticed a spike in prices since the start of the pandemic. It now costs about $ 95 to fill his car’s gas tank; Six months ago, she said, she paid $ 60. Gas costs around $ 4.50 a gallon, and California prices tend to be a dollar above the national average. In the grocery store, meat and produce became more expensive, she said.
“I can’t even look at a steak,” Dominguez said. “Eggs are a fortune.”
Martin Feuer, 71, a senior retired compliance professional in New York City, said he welcomes the increase in benefits, especially after years of adjustment increases hovering around 1% to 2%.
“Amen,” Feuer said, “5.9% is pretty good, actually.”
He is worried, however, that his monthly Medicare Part B premium will increase, straining his Social Security benefits.
In an August report, Medicare administrators said the standard monthly premium for Part B could increase to $ 158.50, up $ 10 from this year’s premium.
The pandemic recession has changed the outlook for social security. A recent analysis indicated that the combined reserves of the program’s trust fund are expected to be depleted by 2034. It would then pay 78% of planned benefits, unless Congress takes action.
An analysis by the Center for Retirement Research at Boston College estimated that the increased cost of living adjustment could deplete the combined reserves of trust funds at an even faster rate if lawmakers do not take the necessary steps to strengthen program finances.
“We are already late for the game,” said Alicia H. Munnell, director of the center. “Congress needs to make an adjustment so that people who depend on this program do not fear that their benefits will be reduced.”
This year’s Social Security administrators are reporting amplified warnings about the program’s long-term financial stability. But there is little talk of fixes in Congress, with lawmakers engrossed in President Joe Biden’s main national legislation and partisan national debt machinations. Social Security cannot be dealt with by the budget reconciliation process Democrats are trying to use to keep Biden’s promises.
Social Security’s turn will come, said Rep. John Larson, D-Conn., Chairman of the House Social Security subcommittee and author of legislation to address loopholes that would prevent the program from paying workers. full benefits in less than 15 years. His bill would increase payroll taxes while changing the COLA formula to put more weight on health care spending and other costs that weigh more heavily on seniors. Larson has said he intends to move forward next year.
Economist Marilyn Moon, who has also served as a public administrator for Social Security and Medicare, said she believes the current inflationary surge will be temporary, due to highly unusual economic circumstances.
“I think there will be an increase this year that you won’t see happening again in the future,” Moon said.
But it shouldn’t be long before policymakers get to work on retirement programs, she said.
“We are at a time when people do not respond to political needs until there is a sense of hopelessness, and Social Security and Medicare are programs that benefit from long planning. term rather than short-term machinations, ”she said. noted.
Information for this article was provided by Ricardo Alonso-Zaldivar and Christopher Rugaber of the Associated Press and Madline Ngo of the New York Times.