Millions of Social Security recipients are slated to receive an extra $92 a month thanks to a cost-of-living adjustment (COLA) for rising prices throughout the coronavirus pandemic, the Associated Press reported.
The new COLA, the largest in 39 years, will give the average retiree a 5.9 percent overall raise in benefits starting next year. Cost-of-living adjustments have averaged 1.65 percent over the past 10 years.
The average retiree is expected to receive $1,657 per month with the new adjustment, while a typical couple will see $2,753 per month.
Cliff Rumsey, a retiree living and caring for his wife in Hilton Head Island, South Carolina, told the AP he had seen cost-of-living increases in several areas since the pandemic began, including food prices, caregiver wages, energy costs and personal care products. "It goes pretty quickly," he said.
For more reporting from the Associated Press, see below.
The COLA affects household budgets for about 1 in 5 Americans. That includes Social Security recipients, disabled veterans and federal retirees, nearly 70 million people in all. For baby boomers who embarked on retirement within the last 15 years, it will be the biggest increase they've seen.
"It's going to be welcome," said analyst Mary Johnson of the nonpartisan Senior Citizens League advocacy group. "But what we are hearing is that even with the COLA, buying power will still be eroded because price increases are still going up."
Policymakers say the COLA was designed as a safeguard to protect Social Security benefits against the loss of purchasing power in an ever-changing economy and not a pay bump for retirees. About half of seniors live in households where Social Security benefits provide at least 50 percent of their income, and one-quarter rely on their monthly payment for all or nearly all their earnings.
"Regardless of the size of the COLA, you never want to minimize the importance of the COLA," said retirement policy expert Charles Blahous, a former public trustee helping to oversee Social Security and Medicare finances. "What people are able to purchase is very profoundly affected by the number that comes out. We are talking the necessities of living in many cases."
This year's Social Security trustees report amplified warnings about the long-range financial stability of the program, but there's little talk about fixes in Congress with lawmakers' attention consumed by President Joe Biden's massive domestic agenda legislation and partisan machinations over the national debt. Social Security cannot be addressed through the budget reconciliation process Democrats are attempting to use to deliver Biden's promises.
But Social Security's turn will come, said Representative John Larson, D-Conn., chairman of the House Social Security subcommittee and author of legislation to tackle looming shortfalls that would leave the program unable to pay full benefits in less than 15 years. His bill would raise payroll taxes while also changing the COLA formula to give more weight to health care expenses and other costs that weigh more heavily on the elderly. Larson said he intends to press ahead next year.
"This one-time shot of COLA is not the antidote," he said.
Although Biden's domestic package includes a major expansion of Medicare to cover dental, hearing and vision care, Larson said he hears from constituents that seniors are feeling neglected by the Democrats.
"In town halls and tele-town halls, they're saying, 'We are really happy with what you did on the child tax credit, but what about us?'" Larson added. "In a midterm election, this is a very important constituency."
The COLA is only one part of the annual financial equation for seniors. An announcement about Medicare's Part B premium for outpatient care is expected soon. It's usually an increase, so at least some of any Social Security raise goes for health care. The Part B premium is now $148.50 a month, and the Medicare trustees report estimated a $10 increase for 2022.
Economist Marilyn Moon, who also served as a public trustee for Social Security and Medicare, said she believes the current spurt of inflation is an adjustment to highly unusual economic circumstances and the pattern of restraint on prices will reassert itself with time.
"I would think is going to be an increase this year that you won't see reproduced in the future," Moon said.
Policymakers should not delay getting to work on retirement programs.
"We're at a point in time where people don't react to policy needs until there is a sense of desperation, and both Social Security and Medicare are programs that benefit from long-range planning rather short-range machinations," she said.
