What You Need to Know
- With the rise in the CPI-W, the COLA is estimated to rise 5.3%.
- The biggest driver behind the rise in costs is energy, which increased 28.5%.
- Medical care prices haven't seen much of a jump.
As inflation rises, the cost-of-living adjustment (COLA) that Social Security recipients can expect rises along with it. The easing COVID-19 pandemic has led to some unusual increases in certain components of the price index on which COLAs are based.
That index, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), rose 5% in May, leading The Senior Citizens League, an advocacy group, to raise its 2022 Social Security COLA estimate to 5.3% from 4.7% a month earlier.
The official COLA, based on third-quarter inflation data, will be announced in mid-October. In 2020, the COLA was 1.3%.
Mary Johnson, the Social Security and Medicare analyst who calculates the League’s estimates, expects more increases in the next few months, especially when looking at some of the major drivers of the CPI-W rise, she tells ThinkAdvisor.
For example, she cites energy, which is heavily weighted in the CPI-W, as one of the key increases year over year, having risen 28.5%, according to the Bureau of Labor Statistics. Gasoline prices rose 56.2%.
Demand for gas is surging as shelter-at-home orders are lifted and travel resumes, she says, though she believes gasoline prices probably will fall toward the end of summer.