Is the Social Security increase for 2022 the largest in US history?
While the 2022 COLA announced by the Social Security Administration is high in comparison to recent years, it is still lower than many seen in the 1970s.
On 13 October, the Social Security Administration (SSA) announced that the Cost-of-living-adjustment, or COLA, for 2022, would be 5.9%. The COLA is based on three months of Consumer Price Index data that this year showed that prices have risen dramatically since the pandemic began, causing much financial stress for beneficiaries who live on a fixed income.
#BREAKING! About 70 million Americans will get a 5.9% increase in monthly #SocialSecurity benefits and #SSI payments in 2022. Check our blog later this morning for more information: https://t.co/AmvW49Uzko #COLA #2022COLA pic.twitter.com/ds0cZGQSig— Social Security (@SocialSecurity) October 13, 2021
Organizations that advocate for the rights of senior citizens had reported that many Social Security beneficiaries had cut the number of meals they were eating or avoided picking up prescriptions because they were unable to make ends meet. While advocates welcome the 5.9 percent increase, some like the Senior Citizens League are urging Congress to send a targeted $1,4000 stimulus check to beneficiaries.
This check could be a critical lifeline to many who may see their entire COLA increase go towards the payment of Medicare premiums. Premiums for Medicare tend to increase on a yearly basis, and the Senior Citizens League has argued that "the COLA also doesn’t reflect cost increases in Medicare premiums and other rapidly growing Medicare costs." The organization cited research that has shown that Medicare Part B premiums, "are one of the fastest-growing costs in retirement," and because they "are automatically deducted from Social Security checks, often consume most, or even all, of the COLA increase."
A brief history of the COLA
Social Security as a welfare program was established in 1940.
For the next ten years, the federal government made no changes to the benefit amount distributed to beneficiaries.
In 1950, based on the rising cost of living, a seventy-seven percent increase was tacked onto the benefits. Between 1950 and the early 1970s, much smaller increases were passed:
- 1952: 12.5%
- 1954: 13%
- 1959: 7%
- 1965: 7%
- 1968: 13%
- 1970: 15%
- 1971: 10%
- 1972: 20%
- April 1974: 7%, July 1974: 11%
The 1970s and 1980s were a time of relatively high inflation in the United States, which prompted the federal government to enact a yearly COLA increase. A law passed in 1972, mandated that starting in 1975, the SSA would increase benefits if inflation surpassed three percent.
In 1986, Congress eliminated the three percent threshold, meaning that each year where inflation was captured, benefits would grow even by a small margin.
However, as was the case in 2010 and 2011, no COLA was issued, as prices decreased across the board after the 2008 Financial Collapse and subsequent economic recovery. Although the two years, 2010 and 2011, where no COLA was implemented did follow the 2009 COLA increase of 5.8 percent. When the 5.8 percent increase was announced it was the largest COLA many beneficiaries had seen since 1990.
Highest COLA increases
Since 1975, the highest COLA increase, 14.3 percent, was seen in 1980. The following year, prices continued to soar and a COLA of 11.2 percent was implemented. Aside from 1980 and 1981, the highest COLA increases were calculated in:
- 1979: 9.9%
- 1975: 8%
- 1982: 7.4%
- 1978: 6.5%
- 1976: 6.4%
Nominal Increase VS Percent Increase
However, when considering the actual dollar amount beneficiaries will receive in 2022, this year's COLA will likely be the largest in history. Since 2000, the only year that has seen a COLA over five percent is 2008.
Since in most years the benefit amount increases, a larger COLA, will mean that that net benefits will be higher. For example, while the 1980 COLA was larger than the one announced in October 2021, the average benefit amount was $238 for an individual in 1980. Even with a 14.3 percent increase, the net benefit amount in 1981 did not come close to the average benefit in 2021, $1,544, let alone that of next year.
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