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Social Security COLA Estimate for 2022 Raised to 6.2%

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What You Need to Know

  • Next year's COLA is estimated at 6.2% based on latest CPI data, up from 6.1% last month, says The Senior Citizens League.
  • The CPI increased 5.4% over past 12 months and 0.5% from previous month, according to the Bureau of Labor Statistics..

The annual cost-of-living adjustment, or COLA, for Social Security benefits in 2022 — usually announced in October — could be 6.2%, the highest since 1983, based on Wednesday’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 would be 6.1% a month ago.

The latest estimate, which is based on July consumer price index data of 5.4%, is especially significant as next year’s COLA will be calculated on the average of third quarter, or July, August and September, CPI data.

“Now with one third of the data needed to calculate the COLA already in, it increasingly appears that the COLA for 2022 will be the highest paid since 1983 when it was 7.4%,” Johnson said in a release.

The consumer price index for all urban consumers in July rose 5.4% over the past 12 months, and 0.5% from the previous month, the Labor Department reported Wednesday. (The CPI includes food and energy.)

Economists polled by Bloomberg had forecasted a 0.5%  month-over-month increase and a 5.3% increased compared to a year earlier.

Key components of the increase were energy prices, up 1.6% from the previous month (as gasoline prices rose 2.4%), and new vehicle prices, which increased 1.7% from previous month.

July’s core CPI, which excludes food and energy, rose by 0.3% from June — its smallest increase in four months — and 4.3% from a year ago, according to the BLS. (In June, the core CPI was up 0.9% from May and 4.5% from a year earlier.)

Possible COLA Reform

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.

Advocacy groups argue that Social Security COLAs should be based on the CPI for Elderly, or CPI-E, which better reflects senior expenses. Indeed, Congress is considering at least one bill to make the change. And though the CPI-E calculation typically has shown higher COLAs in the past 11 years, that is not always the case.

In July, 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. 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.

Senior Spending

In a survey of members about actions taken during the pandemic, The Senior Citizens League found that 35% of respondents had spent their emergency savings during the pandemic, 20% had made changes to retirement savings investments, 19% had drawn down retirement savings more than usual while 19% had visited a food pantry.

Other actions taken include helping family with room and board, applying for assistance with heating and cooling costs, going back to work, refinancing a home mortgage, and applying for assistance with medical or prescription drug expenses or applying for rental assistance.