How has Social Security COLA increased over the last 10 years?
With a record COLA expected to be announced for 2022 in the coming days, how has the Cost-Of-Living-Adjustment changed over the past decade?
Those who receive Social Security Benefits generally live on a fixed income, gyrations in the cost of everyday things can have a huge impact on their finances. To help counter the effects of inflation on an annual basis the Social Security Administration adjusts how much the agency pays out to beneficiaries each year.
The correction to monthly payments over the following year is called the Cost-Of-Living-Adjustment or COLA. As the US pulls out of the covid-19 pandemic-induced economic crisis, inflation has been higher than at any time since the 1980s leading to expectations of a record COLA increase for 2022.
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) which are published monthly by the US Bureau of Labor Statistics. This an official measure of the monthly price change of a basket of goods and services. The Social Security Administration uses the monthly average from the third quarter, July, August and September, of the last year a COLA was determined compared to the third quarter of the current year.
COLA over the last 10 years
Over the past ten years the COLA increases have ranged from a zero percent rise in 2016 to 3.6 percent in 2012. However, the yearly average of the 10 COLAs is 1.7 percent. A far cry from the COLAs from the mid-1970s to the early 1980s. The highest COLA was in 1980 when it increased 14.3 percent. The estimates for 2022 could be the highest since that period but closer to the last major increase in 2009 of 5.8 percent.
Cost-Of-Living-Adjustment 2011 to 2021
Source: Social Security Administration
What will the COLA be in 2022?
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 is scheduled to publish Consumer Price Index data from September, the final month of the third quarter, 13 October. The Social Security Administration, if it follows previous years, can be expected to release the COLA for 2022 the same day.
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.