Social Security entitlements haven't gotten a decent boost in decades and the program barely kept up with the cost of living. But next year, those checks could be bigger.
Here's a breakdown of the numbers to explain why Social Security recipients could get more money starting in 2022.
Inflation is creeping up. While that's bad for the economy, it's good if you live on Social Security. Every year, the entitlement benefit millions of people rely on is adjusted to account for inflation. Over the last 20 years, inflation hasn't been a big issue, so the monthly payment hasn't gone up all that much. In 2021, the increase was 1.2%, but next year, the Cost-of-Living Adjustment might increase by 6.1%. This would be the biggest increase since the early 1980s.
"It's important to note, that the Social Security Administration still has three more months of data to gather," said Chris Hobart, a wealth advisor with the Hobart Financial Group. "It's still a floating number but everything points to an increase in 2022."
How much of an increase are we talking about? It depends, but for most folks, it's less than $100.
"The Cost-of-Living Adjustment that we will see in January will most likely be about $80 per person or retiree on Social Security," Hobart said. "That's a nice little hit to the pocket."
With continued inflation comes a long-term danger to Social Security. The money is invested in the U.S. Treasury, and that average return may not keep up with inflation, meaning the pot of money retires depend on dwindles faster. So how does that affect you? There could be possible tax increases down the road or changes to when you might be eligible, or perhaps a lesser amount doled out based on means testing.
The COLA will be announced in October and the first adjusted benefit payment will be made in January. The increase will be there, but it depends on economic activity in this last quarter of 2021 to know by how much.
These numbers tend to be fluid so that $80 increase might not be exact. But the bottom line is if you solely live on Social Security, then expect some sort of a raise.
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