After several years of tepid cost-of-living increases, seniors are likely to get a significant raise in their Social Security benefits in 2022.
The Kiplinger Letter is forecasting that the annual cost-of-living adjustment for Social Security benefits for 2022 will be 6%, the biggest jump since 1982, when benefits rose 7.4%. That would also be slightly lower than The Kiplinger Letter predicted in July.
The final adjustment announced on Oct. 13 could be a little different, as the inflation rate for September has yet to be determined.
The projected increase reflects the rebound of consumer prices that were depressed during the pandemic. Gasoline prices rose strongly this past year, as have airline fares and hotel rates. There have been notable pickups in the price of appliances, furniture, car insurance, and eating out. Prices of new cars are up because a shortage of semiconductors has limited production, which has also caused used vehicles prices to surge 41%.
Social Security COLAs are calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers. If prices don’t increase or fall, the COLA is zero. That happened in 2010 and 2011, as the economy struggled to recover from the Great Recession, and again in 2016, when plummeting oil prices wiped out the COLA for that year. In 2021, the COLA increased payouts by 1.3%.