In the United States, the cost of living will grow strongly: because of this, pensions and social benefits will increase

The Adjusted Cost of Living in the United States (COLA) could rise dramatically in 2022. This will lead to a tangible increase in social benefits. Aarp.

Photo: Shutterstock

Due to rising inflation, the cost-of-living in the United States may grow by the largest figure in the last 40 years. And social security beneficiaries can get much higher benefits thanks to the cost of living adjustment (COLA), to which pensions and some other social benefits are tied.

“COLA will undoubtedly be higher than it has been in the last decade, probably in the 5,5% to 6% range due to rising prices,” says David Sertner, legislative counsel and director of legislative policy at AARP.

Any estimates are preliminary and the actual COLA will be subject to price changes between July and late September 2020.

“With one-third of the data needed to calculate the COLA already entered, it is increasingly clear that the 2022 COLA will be the highest since 1983, when it was 7,4%,” says Mary Johnson, Social Security policy analyst. Senior Citizens League.

The Social Security Administration (SSA) usually announces the annual cost of living adjustment amount, if any, in October. The increase in benefits usually takes effect in January.

Price increase

COLA estimates for 2022 range from 5,8%, according to economist Bill McBride, who runs the financial and economic blog Calculated Risk, to 6-6,2%, according to The Senior Citizens League.

Moody's Analytics estimates the 2022 COLA at 5,6%. Stephen Goss, SSA's chief actuary, says COLA will be close to 6%.

At the start of 2021, the cost of living adjustment was 1,3%. This brought in an average of about $20 per month for individuals receiving Social Security benefits (pensions and Supplemental Security Income - SSI). A 5,5% increase would increase the average monthly benefit by about $83; an increase of 6,1% would mean a monthly increase of $93.

The rise in prices in 2021 is the driving force behind the higher COLA scores.

“It's energy prices that are causing chaos,” said Mary Johnson, a policy analyst at The Senior Citizens League. — A gallon of unleaded gasoline costs an average of $3,18, up from $2,19 a year ago. Oil demand fell last year with the onset of the pandemic and is taking time to ramp up again. Now, as businesses reopen and people travel more, demand is rising. Supply just hasn’t caught up with demand yet.”

"Higher prices reflect the disarray caused by the pandemic," said Mark Zandi, chief economist at Moody's Analytics.

For example, hotel room prices have risen 19,6% in the past 12 months ending June 30, when travelers hit the road again. Used car prices jumped 31,9% as the supply of new cars plummeted during the pandemic. Zandi expects inflation to drop to around 2% in 2022 when supply and demand equalize.

On the subject: Biden wants the IRS to keep track of the accounts of all Americans with at least $ 600

High prices have a serious impact on retirees. Social security benefits are only raised once a year, and inflation rose 0,3% in August alone.

“Those who receive modest Social Security benefits do have problems,” Johnson says. Other retirees have had to use more of their savings than they planned because Social Security benefits haven't kept up with 2021's strong inflation, she said.

How COLA is calculated

The COLA is contingent on increases in the Consumer Price Index for Urban Wage and Clerical Workers, or CPI-W, an official measure of monthly price changes in a market basket of goods and services, including food, energy and health care. The Bureau of Labor Statistics tracks both the CPI-W and its better-known cousin, the CPI-U, the Consumer Price Index for All Urban Consumers, which is a broader measure of retail prices.

CPI-W rose 5,8% in the 12 months ended August. In October, the Social Security Administration will compare the CPI-W for July, August and September 2021 with the CPI-W for the same period in 2020. The percentage change between the third quarter of last year and the third quarter of this year will be the COLA amount for the next year.

COLAs have averaged 10% over the past 1,7 years, increasing from zero in 2015 to 3,6% in 2011. The most recent time that beneficiaries received more than 5% co-payments due to COLA was in 2008, when the growth was 5,8%.

Since Congress created automatic annual COLA adjustments in 1975, there have been three years—2009, 2010 and 2015—during which benefits did not increase at all. The COLA does not apply if inflation remains the same or decreases from year to year. The largest increase was 14,3% in 1980.

Social Security is funded by a payroll tax of 12,4% of wages—employees and employer each pay 6,2%, self-employed people pay the full 12,4%.

You may be interested in: top New York news, stories of our immigrants, and helpful tips about life in the Big Apple - read it all on ForumDaily New York.

You may not see an increase in your benefit. If your Medicare Part B premiums are deducted from your Social Security (as is the case with 70% of Part B members), the Medicare rate increase may offset all or part of the COLA benefit increase.

Read also on ForumDaily:

The fun ends in tragedy: a child becomes infected with a brain-eating amoeba in a playground in Texas

US will not accept travelers vaccinated with Russian Sputnik

XNUMX obvious ways people often forget to save money

Do you want more important and interesting news about life in the USA and immigration to America? — support us donate! Also subscribe to our page Facebook. Select the “Priority in display” option and read us first. Also, don't forget to subscribe to our РєР ° РЅР ° Р »РІ Telegram  and Instagram- there is a lot of interesting things there. And join thousands of readers ForumDaily New York — there you will find a lot of interesting and positive information about life in the metropolis.