For months, seniors on Social Security have been waiting to hear what 2022’s cost-of-living adjustment, or COLA, will look like. That number is calculated based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), and so a COLA couldn’t be determined until inflation data for September was made available.
This week, the Social Security Administration announced that seniors will be in line for a 5.9% COLA in 2022. That’s a major improvement from the 1.3% they received for 2021.
Or is it? A giant COLA might seem like a wonderful thing for seniors. But in reality, it’s not the massive windfall Social Security recipients might think it is.
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It’s all about keeping up
The purpose of COLAs is to help seniors maintain their buying power in the face of inflation. If seniors were to start out collecting a single benefit and keep getting that same benefit over the course of 20 or 30 years, they’d eventually be unable to keep up with their living costs.
The reason 2022’s COLA is so large is that inflation has been rampant this summer, driving up the cost of food, gas, and just about everything else. While a giant raise may be helpful to seniors, it’s also apt to get instantly swallowed by higher living costs across the board. In fact, based on the way consumer prices are trending, it’s unlikely that seniors will manage to come out all that far ahead in 2022, even with a large COLA at play.
