Social Security benefits are linked to the Consumer Price Index for urban workers, which weighs the average prices of goods used by workers younger than retirement age (such as gas). The hike for 2022 can be attributed to inflation caused from the country’s rebound since the pandemic began, such as the price in gasoline and petroleum, Johnson said. “We are talking about an inflation rate that almost all Social Security recipients have never experienced,” she said. See: Biggest Social Security COLA in years coming, but it could be bigger Anybody who began claiming Social Security at the earliest allowable age, which is 62, that year would be 102 today. Next year’s COLA will be the highest it’s been since 1982, when it was 7.4%. Johnson tracks COLA every year, and her estimates for the following year’s adjustments are usually quite accurate (she expected the 2022 COLA to be between 6% and 6.1%, for example). “For almost everybody who is retired and still alive today and receiving Social Security, this will probably be the highest COLA they have ever received,” said Mary Johnson, a Social Security policy analyst for the Senior Citizens League. You can calculate your own personal rate of inflation here.For more than a decade, these adjustments have averaged below 2%, which in many cases has done little for Social Security beneficiaries – or nothing, in instances when their expenses have risen dramatically but their benefit checks have barely adjusted for inflation. Those who don’t drive can largely avoid high gas prices, for example. Of course, a retiree’s personal rate of inflation will depend on individual spending patterns. They’re shocked to find they’re spending between 25% and 50% more on construction costs than just three years ago, he said, leading some to have to withdraw more from their nest eggs than expected. Daniel Beckerman, a certified financial planner in Ocean Grove, N.J., said many of his clients have embarked on home improvement projects after spending more time at home in 2020. It’s not just prices on essentials that are soaring. Part B premiums rose 14.5% in 2022, one of the biggest jumps in the program’s history. Medicare Part B premiums have seen some of the most dramatic price increases in recent years, and they come directly out of most beneficiaries’ Social Security checks. That means that even when the overall inflation rate is lower than today’s, medical expenditures climb at a higher rate than the COLA. Healthcare inflation typically rises at a rate of 1.5 to 2 times CPI, and that pace continues today, according to HealthView Services, a firm that provides healthcare cost data to financial advisors. Between January 2000 and March 2022, the COLA increased Social Security benefits by 64%, while the cost of goods and services consumed by the typical retiree rose by 130%, according to Johnson’s analysis. The 5.9% raise they got this year has been no match for today’s steeply rising gas, grocery, and other prices. However the final COLA shakes out, many older adults will enter next year stretched.

2022 cola increase