According to the Social Security Administration, over 69 million Americans currently receive some form of monthly benefits. Though many people think of Social Security as a retirement program, there are other circumstances that qualify for benefits. Those include seniors over 62, workers who have become disabled, and families who have lost a parent or spouse.
Social Security for Seniors
Though all SSA recipients are eligible for a benefit increase in 2022, let’s focus on Social Security for Seniors. The total amount of Social Security income you’ll receive depends on:
- Your contribution to the program based on your lifetime earnings
- The age that you choose to begin receiving benefits
- Your eligibility to receive a spouse’s benefit instead of your own
Senior Cost of Living
As the pandemic enters its second year, the hits to the economy keep coming, with rising prices on many of our basic goods and services. If you’ve waited until retirement to begin traveling, you’ve undoubtedly noticed that prices for gas, hotels and rental cars are currently at record highs. Even the cost of services like Airbnb, Vrbo, Uber, and Lyft are soaring. And it’s not just the travel industry seeing these types of increases. It seems like everyone is raising prices to compensate for much of their lost 2020 revenue.
It’s not just above-average inflation pushing prices higher in so many areas of the economy. Changing business models, heightened demand, and delays in the supply chain are all contributing factors. Here are some goods and services you’re likely to be paying more for in the coming months:
Gas: According to data from AAA, customers will continue to pay more than $3 per gallon at the pump for the foreseeable future. The national average price per gallon has not been this high since 2014.
- Cars: Due to supply chain delays and economic uncertainty, car dealerships have a fraction of the vehicles they typically have on the lot. According to JD Power, the average new car price hit a record $38,255 in May 2021, up 12% from the same period a year ago. And fewer new cars means fewer used cars available for purchase. As a result, retail used car prices are up 20%. Higher wholesale prices are heading in a direction that says more significant increases are on the way.
Rideshare: With a massive shortage of drivers, riding with Uber or Lyft can cost up to 40% more than the previous year.Even loyal rideshare customers are using taxis again to save money.
- Restaurants: Menu prices are up 4% in full-service restaurants and over 6% at restaurants with counter service. Rising costs related to gas and employee pay are significant contributors to why restaurant prices are steadily increasing.
Groceries: According to the USDA, grocery store food prices are expected to rise as much as 3% this year. In 2020, the cost of meat soared nearly 10% due to plant shutdowns and rising transportation prices. And now, in 2021, it’s fresh fruit prices that consumers will need to keep an eye on.
Hotels and vacation rentals: After staying close to home for so long, travelers are flying, hitting the road, and booking cruises again. We already know gas prices are up, so we expect to pay more for airline tickets and road trips. However, you may be shocked at the room rates you’ll be paying at hotels and private vacation rentals.
Homes: A real estate boom is underway, with homeowners entertaining multiple offers, routinely selling over the asking price. According to the National Association of Realtors, the median existing-home sale price was $363,300, up nearly 25% from 2020. Unfortunately, rents are also up everywhere, as the median cost for a one-bedroom apartment tops $1200 a month.
What is COLA?
In theory, the Social Security Cost of Living Adjustment (COLA) helps protect SSA benefits from inflation and is driven by changes in the consumer price index. The Consumer Price Index (CPI) is an economic measure that examines the weighted average of prices of everyday consumer goods and services, like transportation, food, and medical care.
National average prices are used and calculated as the percentage increase between average prices in the third quarter of the current year and the previous year’s third quarter.
For decades the average COLA has hovered around 3%, giving retired seniors and other SSA recipients a modest bump in their monthly amounts.
Social Security Adjustment
In 2021, the Social Security adjustment was a measly 1.3%, the smallest cost-of-living adjustment (COLA) since 2017. Considering that recipients were initially faced with a freeze in their benefits, many considered themselves lucky to have received any increase at all.
The average monthly Social Security benefit payable in January 2021 increased by $20, from $1,523 to $1,543. In addition, the average monthly benefit for a couple receiving benefits rose $33, from $2,563 to $2,596. And the maximum Social Security benefit for a worker retiring at full retirement age increased from $3,011 per month to $3,148, an additional $137 a month.
As the economy continues to improve and employees get back to work, SSA recipients can expect a significant increase in their 2022 benefit checks. According to the September Kiplinger Letter forecast, the COLA may be as high as 6% in 2022, the most significant jump since 1982, when benefits increased by 7.4%.
With a 6% COLA, that same $1,523 check we mentioned earlier increases to $1,614. The average monthly benefit for a couple who receives benefits jumps from $2,563 to $2,716. The maximum Social Security benefit for a worker retiring at full retirement age increases a $3,011 check to $3,191.
Social Security for Older Adults
Every little bit helps when it comes to making ends meet on a fixed income. So, what do you need to do to get the adjustment? Absolutely nothing. The benefits increase is effective on January 1, 2022 and will automatically appear in your check or direct deposit.