In 2022, Social Security will see it’s largest raise in almost forty years. COLA (Cost-of-living-adjustments) will increase the Social Security payout by 5.9 percent. This bumps the average benefit from around $1,560 to $1,657 a month. This is helpful, but concern is rising that it won’t be enough to meet economic inflation, which is also on the raise.
Inflation is a common thing, but the rate that it grows can be disconcerting. CNBC’s Lorie Konish writes in October of 2021 the Consumer Price Index increased by 6.2%, also the largest raise in almost 40 years.
The SSA uses this Consumer Price Index to determine COLA increases. When the cost of goods grows faster than our benefits, we still have to pinch pennies.
On top of that, Boston College’s Center for Retirement Research reports that inflated income taxes and Medicare premiums will wear down the increasing COLA benefits.
This year Medicare Part B premiums are expected to jump up 14.5 percent. These premium charges are deducted directed from Social Security checks. Over the last twenty years, Medicare premiums have grown almost 6 percent while Social Security has had a steady 2 percent growth rate.
Income tax increases can also eat at our benefits. Social Security is tied to federal income tax depending on the recipients. Individuals that make over $25,000 a year are subjected to Social Security income taxation. This also applies to married couples that earn more than $32,000.
Senior’s cost of living has increased over the last few years. Many believe that the way COLAs are calculated leave a lot to be desired. Until COLAs can reflect the expenses seniors face, understanding how to maximize your benefits can make inflation hurt a little less.
Additionally, protecting the Social Security Trust against unnecessary spending can help. By protecting the Trust, we can endure inflation with the knowledge that our benefits will be pad out regardless.