The Social Security cost-of-living adjustment will be 5.9% in 2022, representing the largest annual hike in 40 years. Approximately 70 million Social Security beneficiaries will be affected. More than 64 million Social Security recipients will see the increases in their monthly checks beginning in January while about 8 million Supplemental Security Income (SSI) beneficiaries will see the increase starting December 30th. The estimated average monthly benefit for all retired workers will rise to $1,657, up from $1,565. Checks will be automatically adjusted to reflect the increase.
Federal benefit rates increase when the cost-of-living rises, as measured by the Department of Labor’s Consumer Price Index (CPI-W). In other words, prices for goods and services are more expensive, therefore the cost-of-living adjustment (COLA) is in place to offset these higher costs. The Social Security COLA was 1.3% in 2021. The last relatively high increase came in 2009 when beneficiaries saw a 5.8% annual adjustment. The average COLA in the past decade was just 1.65%. Furthermore, in three of the past 12 years, the adjustment was zero.
Berit Suba teaches Retirement Planning in Columbia University’s Master’s of Wealth Management program. Berit is a practicing financial advisor who received her MBA at Columbia University and holds the CFP®and Chartered Retirement Planning CounselorSM credentials.