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Social Security COLA Estimate for 2022 Raised to 6.1%

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What You Need to Know

  • The latest estimated cost-of-living adjustment reflects a 5.4% increase in the consumer price index for the past 12 months.
  • It would be the biggest COLA since 1983.
  • The CPI increased 0.9% in June, the largest 1-month change since June 2008.

The annual cost-of-living adjustment, or COLA, for Social Security benefits in 2022 — usually announced in October — could be 6.1%, the highest since 1983, based on Tuesday’s Consumer Price Index announcement, according to Social Security and Medicare policy analyst Mary Johnson of the Senior Citizens League, which estimated the 2022 COLA at 5.3% a month ago.

“This is the highest COLA I’ve ever estimated in my 26-plus years of researching the annual inflation adjustment,” Johnson told ThinkAdvisor.

The consumer price index for all urban consumers in June rose 5.4% over the past 12 months, the Labor Department reported. From May, the CPI grew 0.9% the largest 1-month change since June 2008, when the index rose 1.0%, according to the Bureau of Labor Statistics. This represents the second-largest advance in over a decade. (The CPI includes food and energy.)

Economists polled by The Wall Street Journal had forecast a 0.5% month-over-month increase.

June’s core CPI, which excludes food and energy, rose by 0.9% from May and 4.5% from a year ago, according to the BLS. 

‘Soaring Inflation’

While the [COLA] adjustment is high and will come as a welcome boost, retirees are trying to cope with soaring inflation right now with only a 1.3% boost to their benefit this year,” Johnson explained.  

“This big increase in inflation is deeply eroding the buying power of Social Security benefits, and the majority of retirees depend on Social Security benefits for most of their income,” she added.

More on this topic

The Social Security Act stipulates that the formula for calculating COLAs be based on changes in the Consumer Price Index for Urban Wage Earners and Clerical Workers.

(The COLA for December of the current year represents the percentage increase in the CPI-W from the average for the third quarter of the current year to the average for the third quarter of the last year in which a COLA became effective.)

Possible COLA Reform

Last week, Rep. John Garamendi, D-Calif., introduced the Fair COLA for Seniors Act of 2021, which would require Social Security to use the Consumer Price Index for the Elderly (CPI-E) to calculate “a fairer cost of living adjustment” for seniors.

The CPI-E uses the same formulas and prices as the CPI-W but puts more weight on expenditures typical of those 62 and older. COLAs using this index would be 0.2 percentage points higher on average, the Social Security Office of Chief Actuary reported in 2011.

The bill, H.R. 4315, introduced Thursday, would increase benefits and ensure that cost of living adjustments in Social Security “reflect the real rising costs for seniors and disabled Americans,” Garamendi said.

From 1982 to 2011, CPI-E rose at an annual average rate of 3.1%, compared with 2.9% for the methods that are currently used, Garamendi said.