Roughly seventy million Americans who rely on Social Security benefits got what they desperately wanted this week—as it was announced that there will be a 5.9 percent cost of living adjustment (COLA) for 2022.
That massive increase, the biggest bump seen in nearly forty years, is expected to boost retirees’ monthly payments by approximately $90 to an estimated average of $1,657. A typical couple’s benefits will climb by $154 to $2,754 per month.
Last year, the COLA only came in at 1.3 percent, which only gave an average $20 boost to the monthly Social Security checks.
“The guaranteed benefits provided by Social Security and the COLA increase are more crucial than ever as millions of Americans continue to face the health and economic impacts of the pandemic,” AARP CEO Jo Ann Jenkins said in a statement.
“Social Security is the largest source of retirement income for most Americans and provides nearly all income (90 percent or more) for one in four seniors,” she added.
Social Security Running Dry
However, amid this great news for Social Security recipients, another pressing issue is again making headlines—that the COLA boost could ultimately deplete the Social Security fund a year earlier than expected.
“Social Security is already on a path to insolvency and we estimate the higher cost-of-living payments could deplete the program’s trust fund a year earlier than projected,” the Committee for a Responsible Federal Budget noted in a statement.
A recent report released by the U.S. Treasury Department stated that the Old-Age and Survivors trust fund will only be able to pay the scheduled Social Security benefits until the year 2033, while Medicare’s hospital insurance fund is expected to run dry in 2026.
The Treasury Department said in a statement that “the finances of both programs have been significantly affected by the pandemic and the recession of 2020.”
Purchasing Power Eroded
However, the meager annual Social Security increases over the past decades have done little to keep pace with the fast-rising costs of goods and services. In fact, according to the Senior Citizens League, since 2000, Social Security benefits have lost about 30 percent of their purchasing power due to adjustments that have vastly underestimated inflation and rising health care costs.
“Over the past 21 years, COLAs have raised Social Security benefits by 55 percent but housing costs rose nearly 118 percent and healthcare costs rose 145 percent over the same period,” Mary Johnson, Social Security, and Medicare policy analyst for the Senior Citizens League, told FOX Business.
“Even worse, it appears that inflation is not done with us yet, and the buying power of Social Security benefits may continue to erode into 2022,” she continued.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.