Seniors will get a significant bump in their Social Security benefits in 2022.
The Social Security Administration announced on Wednesday that the cost-of-living adjustment will be 5.9% for next year. The increase was driven by large jumps in all sorts of energy prices: gasoline, natural gas and electricity. Prices of both new and used cars and trucks surged as demand soared and computer chip shortages crimped supply. Ditto for appliances, TV’s and other furniture. Restaurants and barbers raised prices as wage rates picked up in the face of shortages of workers. And finally, airfares and hotel rates began to rebound from the lows caused by the pandemic.
This is the largest COLA increase since 1982, when benefits surged 7.4%. It is also in line with the 6% increase that The Kiplinger Letter forecast in September.
Social Security COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers. If prices don’t increase or fall, the COLA is zero. That happened in 2010 and 2011, as the economy struggled to recover from the Great Recession, and again in 2016, when plummeting oil prices wiped out the COLA for that year. In 2021, the COLA increased payouts by 1.3%.