Social Security could get biggest cost-of-living increase in 40 years amid COVID inflation surge

After years of puny increases in their Social Security checks, older Americans will likely get the equivalent of a big raise next year.

The 68 million people — retirees, disabled people and others — who rely on the benefits are likely to receive a 6% to 6.1% cost-of-living adjustment next year because of a COVID-19-related spike in inflation, according to the Senior Citizen League.

Such a rise would far outpace 1.4% average bumps in Social Security payments since 2010 and amount to the largest increase since 1982, according to the Senior Citizen League.

For the average retiree who got a monthly check of $1,559 this year, a 6% rise would increase that payment by $93.54 to $1,652.54 in 2022.

Next month, the Social Security Administration will announce its cost-of-living adjustment — or COLA) —for 2022 based on average annual increases in the consumer price index for urban wage earners and clerical workers from July through September.

The Senior Citizens League projects the increase based on changes in that figure over the past year. But inflation has been volatile recently. Overall prices increased 5.4% annually in both June and July — a 13-year high. But inflation edged down to 5.3% in August, the Labor Department said this past week, as hotel rates and airline fares fell.

Such prices surged as the nation emerged from the pandemic and Americans started traveling again, but Federal Reserve officials have said they believe the spike is temporary.

As a result, the actual cost-of-living increase that Social Security Administration announces next month is something of a moving target and could dip to 5.9% but probably not much lower, says Mary Johnson, a policy analyst with the Senior Citizens League.

The high COLA estimate for next year mostly has been driven by higher gasoline and transportation costs, according to Johnson.

“That works to the advantage of retired and disabled beneficiaries for the COLA payable in January 2022,” she says. “That has not been the case for many of the past 12 years, when cheap gasoline and other falling prices dragged down the COLA.”

Johnson has argued that the broad index should better reflect the spending patterns of seniors, who buy less gasoline, electronics and other products that make up a larger portion of young workers’ budgets. She has called for the Social Security Administration to create an index for the elderly that would put more weight on medical, food, housing and other expenses, which have risen more sharply.