In reaction to soaring inflation, the new Cost-of-Living Adjustment (COLA) for Social Security and SSI beneficiaries is 5.9%, or about $93 more per check each month.
Sarah Tew/CNET
Millions of Social Security recipients will see bigger checks starting this month, the result of the largest increase in benefits since the 1980s.
A new Cost-of-Living Adjustment is increasing payments by 5.9%, about $93 more per month — or $1,116 more annually — for seniors and other beneficiaries.
That adjustment will raise most checks to $1,658, according to the Social Security Administration, up from $1,565 in 2021.
The bump, expected to impact roughly 70 million Americans, is driven by the effect of soaring inflation on the price of consumer goods, which have shot up 5.4% since September 2021, according to the US Bureau of Labor Statistics’ Consumer Price Index.
Also starting this month, the maximum amount of earnings subject to the Social Security tax will increase from $142,800 to $147,000.
For more, here are the best tax deductions to look forward to in 2022 and what to expect from the housing market this year.
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How much of an increase in my Social Security check am I eligible for?
Beneficiaries of Social Security and Supplemental Security Income, or SSI, should have received a letter in December detailing their new COLA benefit rate. You can also check your specific increase online on the My Social Security website, or calculate it yourself by multiplying your 2021 monthly benefit by 1.059 and subtracting your Medicare Part B premium.
According to the Social Security Administration, retirees will receive an extra $93 a month on average, while their spouses will see a $47 bump, taking their average monthly benefits from $794 to $841.
Disabled workers will get a $75 increase on average, from $1,283 a month to $1,358, while disabled widows and widowers will see an average raise of $46 a month, taking them from $772 to $818.
When will I see the additional COLA money in my Social Security check?
The COLA goes into effect with December benefits, which are paid in January. An initial 8 million SSI beneficiaries started receiving the increase on December 30, 2021, but the remaining recipients will see the additional funds this month.
Social Security payments are made on Wednesdays, following a rollout schedule based on the beneficiary’s birth date: If you were born from the 1st through the 10th of the month, your benefits are paid on the second Wednesday of the month and your first increase will appear on your Jan. 12 check.
If your birthday falls between the 11th and 20th of the month, your checks are paid on the third Wednesday, and you’ll see your first COLA increase on your Jan. 19 check.
Those born between the 21st and end of the month receive benefits on the fourth Wednesday, which this month is on Jan. 26.
How much of an impact will the increase in benefits have on the cost of living?
Not as much as you might think. While the 5.9% increase is the highest in 40 years, it’s still not keeping pace with inflation, which rose 6.8% between November 2020 and November 2021.
“We are still going to see this tremendous problem with prices increasing faster than the COLA,” Mary Johnson, Social Security and Medicare policy analyst for the Senior Citizens League, told CBS News.
“So, retirees, anybody living on a fixed income, need to be aware that the 5.9% may look like a bigger increase than we’ve ever gotten,” she added, “But once they go through their household budget, they will realize it still won’t pay for all the increasing bills.”
Johnson told CBS News that inflation is expected to continue to grow in 2022.
Also this year, the standard cost for Medicare’s Part B is soaring 14.5% to $170.10, according to the Centers for Medicare & Medicaid Services, representing an increase of $21.60 per month. And the annual deductible for Medicare Part B beneficiaries is now $233, an increase of $30 from 2021.
According to the CMS, the increases are due to rising prices and utilization across the healthcare system, as well as the possibility that Medicare may have to cover high-cost Alzheimer’s drugs like Aduhelm.
Will Social Security benefits go up as much in 2023?
Not necessarily. The Cost-of-Living Adjustment is based on the increase in the Consumer Price Index (CPI-W) from the third quarter of the previous year through the third quarter of the current year.
According to the Bureau of Labor Statistics, this year’s raise was “the result of broad increases” in the cost of goods, especially gasoline, shelter, food, used cars and trucks and new vehicles.
If inflation abates this year (a good thing) the COLA will shrink as well.
In 2009, the COLA increased by 5.8%, CNBC reports, but the annual adjustment in the subsequent two years was zero.
For more, here are 6 money lessons 2021 taught us, 5 New Year’s financial resolutions you can keep and a few tax deductions to keep in mind.