Social Security benefits are set to rise by 5.9% in 2022, marking the highest increase in the last 40 years. Despite the bump in payments for tens of millions of Americans, experts say that many seniors will likely struggle to keep up with their current expenses.
Experts argue that the cost-of-living adjustments (COLA) each year, based on the Consumer Price Index (CPI) inflation measure, do not accurately account for expenses that seniors face.
"Over the past 21 years, COLAs have raised Social Security benefits by 55% but housing costs rose nearly 118% and healthcare costs rose 145% over the same period," said Mary Johnson, The Senior Citizens League Social Security (TSCL) and Medicare policy analyst. "These two categories in particular are not adequately accounted for in the COLA."
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Key expenses seniors may struggle with in 2022
Even after the historic earnings increase for Supplemental Security Income (SSI) payments planned for Social Security beneficiaries next year, seniors may still struggle with the resources to pay certain expenses, including some basic needs.
"COLAs are intended to protect the buying power of Social Security benefits but, according to consumer price data through July of 2021, Social Security benefits have lost nearly one-third of their buying power, 32%, since 2000, about the length of a typical retirement," Johnson said. "Even worse, it appears that inflation is not done with us yet, and the buying power of Social Security benefits may continue to erode into 2022."
Here are five expenses TSCL said retirees on SSI could struggle with in 2022:
The U.S. Department of Agriculture (USDA) estimates that the cost of food will increase between 1.5% and 2.5% 2022. The cost of dining out could rise even further, at 3% to 4% in 2022.
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Although rent price increases stalled during the height of the COVID-19 pandemic, they could begin making up for lost time next year. TSCL found that rental prices are set to jump 7% or higher, versus the typical 5% annual increase.
Renters are not the only ones expected to struggle with shelter costs next year. Homeowners could also struggle, especially those planning to move or who need to renovate their home. Mortgage rates and home prices are both expected to continue rising in 2022. These higher home prices will create higher local real estate taxes and higher homeowner’s insurance costs.
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Due to rising demand and less inventory, home heating oil and natural gas are growing more expensive. The U.S. Energy Information Administration expects that the cost of heating a home could rise by about 21% to 25% this winter.
Insurers appear to be gearing up for a surge in prescription drug prices in the year ahead. The Centers for Medicare and Medicaid Services estimate that prescription drug plan premiums will increase almost 5% in 2022, and the out-of-pocket threshold before reaching the catastrophic phase of coverage is growing by 7.6%, from $6,550 in 2021 to $7,050 in 2022.
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