Social Security beneficiaries might be in for the highest cost of living adjustment (COLA) in nearly four decades, according to new projections.
The latest estimate from nonpartisan senior advocacy group the Senior Citizens League puts the 2022 COLA, which will be announced in October, around 6.2%.
"The estimate is significant because the COLA is based on the average of the July, August and September CPI data," Mary Johnson, a Social Security policy analyst for The Senior Citizens League, said in a statement. "With one-third of the data needed to calculate the COLA already in, it increasingly appears that the COLA for 2022 will be the highest paid since 1983 when it was 7.4%."
Cost of living adjustments, which began in 1975, are implemented in order to counteract the effects of inflation.
The Social Security Administration uses a formula to determine what the COLA will be each year. It is based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers, which are calculated on a monthly basis by the Bureau of Labor Statistics. Benefits will increase if there is a measurable increase in the index year over year.
Benefits increased by 1.6% in 2020. For a recipient earning $1,479, the average monthly benefit among all retired workers, checks increased to about $1,503 per month.
The Senior Citizens League noted that about 86% of beneficiaries said the bump was not enough.
The cost of living adjustment for 2019 was 2.8%. In 2018 it was 2%, but it was largely perceived to be offset by increases in Medicare costs.
There was a 0.3% increase in 2017 and no adjustment in 2016.
As previously reported by FOX Business, a spike in inflation has squeezed seniors – who received a modest cost of living increase in 2021. That situation, however, is expected to ease due to a relatively large benefit bump next year, as well as expectations that inflation will ease.