When is Social Security COLA for benefits in 2022 announced?
The Social Security Administration will soon be releasing the annual Cost-Of-Living-Adjustment for next year and the increase for 2022 could be historic.
Inflation has been rising at a record pace in 2021 as the economy rebounds from the pandemic, this is not uncommon. Although many Social Security beneficiaries whose income is fixed are experiencing the pain of higher prices right now, that high inflation may also translate into a record increase in benefits.
Every year the Social Security Administration gears what it pays in monthly benefits through the annual Cost-Of-Living-Adjustment (COLA). Social Security benefits are one of the few types of incomes retirees receive that is adjusted for inflation. The COLA for 2022 will be announced in October when the US Bureau of Labor Statics releases its final month of the third quarter Consumer Price Index data.
2022 COLA expected to rise
If the price of what you have to pay for food, energy and more increases, monthly payments the following year will increase, fortunately it doesn’t go the other way around. Inflation rocketed up to a 13-year high this summer due to several factors resulting from the covid-19 pandemic. Government intervention to prop up the economy can’t be ruled out, but the lockdowns and travel restrictions pushed prices down in 2020 and created supply bottlenecks.
When the economy reopened supply couldn’t meet demand for a whole array of goods. This created a perfect storm for prices to spike in 2021 as the economy came roaring back.
How is the COLA calculated?
The change in COLA, if any, is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) published monthly by the US Bureau of Labor Statistics. The Social Security Administration uses the monthly average from the third quarter of the last year of the COLA, in this case 2021 to the third quarter of the current year. Although Social Security benefit payments go out on the first of every month, 1 January is a holiday so the payment is bumped up to the end of December.
Year-on-year the CPI-W is down from the 6% in July, at 5.8% in August according to the US Bureau of Labor Statistics. Despite this slight cooling of inflation, the Fed expects it to remain abnormally high but then drop back around the 2% target next year. Even so, the Senior Citizens League, a nonpartisan senior group, is projecting the COLA for 2022 will be up to 6.1%.
If the prediction is correct, the increase in 2022 would be the highest since 1982 when it was 7.4%. For comparison the 2021 COLA was 1.3%, which for the average retirement benefit amounted to $20 more per month for a total of $1,543. If the 2022 COLA is as predicted, the new average would be $1,628.
When will the 2022 COLA be announced?
The US Bureau of Labor Statistics will release the Consumer Price Index data for September 2021, the last month of the third quarter, on 13 October. Last year, the Social Security Administration released the 2021 COLA the same day that the CPI data for the third quarter was released, so it could be expected the final 2022 COLA will be known Wednesday 13 October 2021.
The Social Security Administration in December 2020 made it easier for beneficiaries to receive information about the COLA. Those who use the My Social Security online service can sign up to receive a message regarding the change in COLA. To receive free notifications from the Social Security Administration, log into your account and under “Message Center Preferences” you can choose to receive an email or text with the latest information.