The Social Security Administration has announced its cost-of-living hike for 2022 and it’s a big one.
Social Security recipients, including senior citizens and workers with disabilities, will see their benefits rise 5.9% starting in January, the administration said Wednesday morning on Twitter. It’s the biggest cost-of-living increase since 1983, when a 7.4% bump took effect.
The raise will benefit 70 million people, including 64 million Social Security beneficiaries and 8 million Supplemental Security Income beneficiaries.
Social Security typically announces annual cost-of-living increases in October and they then take effect in January. The hikes are based on the average rate of inflation over the prior three months.
All sorts of prices have been on the rise for much of the year, which translated into the bigger raise for beneficiaries.
Energy prices in particular have been pushing inflation higher, experts said.
Social Security recipients have been dealing with much smaller cost-of-living increases for much of the last decade. Three times since 2010, beneficiaries didn’t get any increase at all thanks to low inflation.
The 2021 cost-of-living increase was just 1.3%, which translated into an average of about $20 a month for individuals, according to AARP. In 2020, the increase was 1.6%.
Social Security cost-of-living increases are meant to help beneficiaries handle rising prices. But increases in recent years simply haven’t been keeping up with higher costs, leaving many recipients struggling.
Social Security’s overall purchasing power has declined 30% since 2000, according to The Motley Fool. That means if you spent $100 in benefits today, you’d wind up with nearly a third less in goods and services than you would have two decades ago.
Congress is exploring some different approaches to calculating the increases. One bill would use a different measure of inflation to determine the hikes, which supporters say would more accurately reflect recipients’ real expenses.