Social Security Recipients Could See Biggest Increase in Cost of Living in 40 Years

Social Security beneficiaries are on track to receive the biggest increase in the cost of living in four decades, driven by a rapidly recovering economy that has caused the biggest increase in inflation in years.

The Senior Citizens League, a non-partisan group that focuses on issues relating to older Americans, estimated the adjustment could reach 6.1%, based on June inflation data, which showed that Consumer prices in June rose 5.4% from the previous year, the fastest year-over-year jump since 2008.

The annual change in social security is calculated on the basis of the consumer price index for urban and office workers, or the CPI-W.

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If Social Security recipients saw a 6.1% increase in their monthly checks next year, that would mark the largest annual adjustment since 1983, when recipients saw a 7.4% increase. The Senior Citizens League had previously predicted that the COLA for 2022 could be 5.3% based on May data.

“It’s the inflation on steroids, mainly due to energy prices,” said previously Mary Johnson, social security analyst for the Senior Citizens League.

In 2021, beneficiaries received one of the lowest COLA increases in years, with an increase of just 1.3%, or about $ 20 more per month for retirees.

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The estimated figure may still be subject to change and ultimately depends on how the economy performs over the next few months and whether the Federal Reserve raises interest rates to combat rising l ‘inflation.

President Jerome Powell said last week during his testimony on Capitol Hill that central bank policymakers were not considering slowing down anytime soon, telling lawmakers the economy was “far away” from where it needed to be. that the Fed starts to relax in an ultra-easy way. monetary policies put in place during the pandemic.

The Social Security Administration will release the final adjustment percentage in October.

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Since 2000, Social Security benefits have lost about 30% of their purchasing power due to inadequate adjustments that underestimate inflation and rising health care costs, according to the Senior Citizens League. The group pushed Congress to pass legislation that would index the inflation adjustment specifically for the elderly, such as the consumer price index for the elderly or the CPI-E. This index specifically tracks spending by households with people aged 62 and over.

During the election campaign, President Biden said he supported strengthening Social Security’s solvency by tying the annual adjustment to the CPI-E, rather than the CPI-W.