By RICARDO ALONSO-ZALDIVAR and Christopher Ragbar | The Associated Press
WASHINGTON — Millions of retirees on Social Security will see a 5.9% increase in benefits for 2022. The biggest cost adjustment in 39 years follows an explosion in inflation as the economy struggles to overcome the drag of the coronavirus pandemic.
COLA, as it’s commonly called, amounts to $92 per month for the average retired employee, according to estimates released Wednesday by the Social Security Administration. It marks a sudden break from a long lull in inflation, which saw an average cost of living adjustment of only 1.65% per year over the past 10 years.
With the increase, the estimated average Social Security payment for a retired employee would be $1,657 a month over the next year. A typical couple’s benefits would increase from $154 to $2,753 per month.
“It goes by very quickly,” said retiree Cliff Rumsey as he saw the cost of living rise. After a career in sales for a major steel manufacturer, Rumsey lives near Hilton Head Island, South Carolina. He takes care of his wife of nearly 60 years, Judy, at home, who has been diagnosed with Alzheimer’s disease. Since the coronavirus pandemic, Rumsey said she referred to rising prices for food, wages paid to caregivers, who sometimes referred to personal care products for her and Judy, Energy Not to mention the cost.
COLA affects the household budget for 1 in 5 Americans. This includes Social Security recipients, disabled veterans and federal retirees, about 70 million people. For baby boomers going into retirement within the past 15 years, this will be the biggest increase they’ve ever seen.
“It’s welcome,” said Mary Johnson, an analyst with the nonpartisan Senior Citizens League advocacy group. “But what we’re hearing is that even with cola, purchasing power will still decrease because price increases are still going up.”
Policy makers say COLAs were designed as a safeguard against loss of purchasing power in an ever-changing economy to protect Social Security benefits, not a wage increase for retirees. About half of senior citizens live in households where Social Security benefits provide at least 50% of their income, and one-quarter depend on their monthly payments for all or almost all of their earnings.
“Despite the size of the COLA, you never want to underestimate the importance of the COLA,” said retirement policy expert Charles Blahaus, a former public trustee who helped oversee Social Security and Medicare finance. “What people can buy is greatly influenced by the number that comes out. We are talking about the needs of living in many respects
This year’s Social Security Trustees report warned about the long-range financial stability of the program, but little about reform in Congress, with lawmakers focusing on President Joe Biden’s largely domestic agenda legislation and taken from partisan conspiracies on the national debt. Social Security cannot be addressed through the budget reconciliation process Democrats are trying to use to deliver on Biden’s promises.
But it will be Social Security’s turn, said Representative John Larson, D-Conn., chairman of the House Social Security subcommittee and author of the legislation to deal with the impending shortfall that would allow the program to pay full benefits in less than 15 years. will be unable to leave. His bill would raise payroll taxes, while also changing the COLA formula to give more weight to health care expenses and other costs that fall more heavily on the elderly. Larsen said he intends to move on next year.
“This one-time shot of cola is not the antidote,” he said.
Although Biden’s domestic package includes a major expansion of Medicare to cover dental, hearing and vision care, Larson said he hears from constituents feeling neglected by senior Democrats.
“At the town hall and tele-town hall they’re saying, ‘We’re really happy with what you did on the child tax credit, but what about us? Larson said. “In the mid-term elections, this is a very important constituency.”
COLA is only one part of the annual financial equation for seniors. Medicare’s Part B premiums for outpatient care are expected to be announced soon. It’s usually an increase, so at least some of the Social Security increase goes to health care. Part B premiums are now $148.50 per month, and the Medicare Trustees Report forecasts an increase of $10 for 2022.
Economist Marilyn Moon, who also served as public trustee for Social Security and Medicare, said she believes the current surge of inflation is an adjustment to highly unusual economic conditions and a pattern of restraint on prices over time. will re-establish itself together.
“I think there’s going to be growth this year that you won’t see again in the future,” Moon said.
Policymakers should not delay working on retirement programs.
“We are in a time where people do not respond to policy needs until there is a sense of hopelessness, and both Social Security and Medicare are programs that benefit from long-range planning, rather than short-range conspiracies. from,” she said. .