Why is the Social Security COLA Hike so high this year?
Why is the Social Security COLA Hike so large and what does that mean for me?
Every year around this time, as temperatures cool off and plans for the holiday season begin, Social Security Cost of Living Adjustments (COLA) are announced for the next year. For over a decade, these adjustments have averaged less than 2%, typically outpaced by increases in retiree medical costs and overall inflation.
What does this mean for me?
At a time when gas and food has dramatically increased, retirees will find a notable increase in their Social Security checks. The COLA increase for 2022 will be 5.9%, which is the largest increase in Social Security benefits in over 40 years.
So, for example, if a retiree received $24,000 annually in 2021 ($2,000 per month), he/she will receive $25,416 or $2,118 per month.
It’s important to remember that the actual amount you receive will also depend on how much your Medicare Part B and Part D (when applicable) premiums are for 2022. Medicare premiums are anticipated to rise by about $10/month for the lowest income bracket for 2022 although those amounts will not be finalized until December of this year.
There has been a lot of talk as to whether the benchmark for Social Security COLA increases is the appropriate one to use for the benefits since it is tied to the Consumer Price Index for urban workers which accounts for increases in gasoline and petroleum but not healthcare. But, for most retirees, the 5.9% increase in Social Security benefits will be a welcome addition in the upcoming year.
If you have any questions on your Social Security benefits, contact your Hutchinson Family Offices financial advisor for customized assistance.
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