Record Social Security Increase Comes Amid Red-Hot Inflation
The 5 percent increase might not be enough to counter the impact of inflation.
For the tens of millions of American retirees who rely on Social Security benefits each and every month, the Social Security Administration’s (SSA) cost of living adjustment (COLA) announcement is generally a must-read.
And it was just last fall that the agency confirmed that it will indeed go ahead with a 5.9 percent COLA for this year, bringing smiles to millions of cash-strapped seniors who have often suffered mightily over the course of the nearly two-year-long pandemic.
According to personal finance expert Christy Bieber, “Social Security retirees are experiencing something that hasn’t happened for four decades.”
She later highlighted that a COLA this high hasn’t been seen for decades. “The last time seniors got a larger raise was back in 1982 when the annual COLA was 7.4 percent,” Bieber said.
Trouble on Horizon
Despite this piece of great news, it appears that rougher waters lie ahead. For one, it has been well documented that Social Security benefits have lost a massive amount of their buying power amid the current red-hot inflationary environment. Making matters worse is the fact that the Centers for Medicare & Medicaid Services already announced that Medicare Part B premiums will increase by a whopping 14.5 percent.
“Over the past twenty-one 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, the Social Security and Medicare policy analyst for the Senior Citizens League, said in a statement.
“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 added.
Bieber echoed similar sentiments. “When prices rise, seniors’ buying power ends up falling because their savings don’t stretch as far,” she wrote. “Savings is one of two important income sources for older Americans, along with Social Security. If you’re retired and withdrawing a set amount from your retirement account, and that money doesn’t buy as much as it did in the past, you end up worse off.”
So, what should retirees who aren’t blessed with giant nest eggs do in such a difficult environment? It may come down to keeping a close eye on how one spends his or her money each month.
Bieber noted that retirees have valid reasons to be concerned about the impact of inflation. “While they may be excited to see a big change to their Social Security checks in the form of larger benefits, belt tightening may still be called for, despite the fact they’ll get more money,” Bieber added.
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.