Huge Social Security cost-of-living increase could accelerate trust's depletion

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Social Security recipients in 2022 are in line to receive the big payment increase in nearly four decades, reflecting a pandemic-drive inflation surge – but the boost could ultimately deplete the fund a year earlier than expected. 

The Social Security Administration said Wednesday that next year's cost-of-living adjustment, or COLA, will be 5.9%. That amounts to a monthly increase of $92 for the average retired Wednesday, bringing the amount to $1,657, the administration said. A typical couple's benefits would climb by $154 to $2,754 per month.  

But the increase – the steepest annual adjustment since 1982, when recipients saw a 7.4% bump – could push Social Security closer toward insolvency. 

The government has projected that Social Security, one of the biggest federal benefit programs, will be unable to pay full benefits starting in 2033. At that point, only 76% of benefits could be paid out. 


But factoring in the nearly 6% increase in benefits, the program could be dealt a financial blow: The Committee for a Responsible Federal Budget estimated the fund could be depleted by 2032 with the latest COLA increase. 

"Social Security is already on a path to insolvency and we estimate the higher cost-of-living payments could deplete the program’s trust fund a year earlier than projected," the group said in a statement. 

The increase marks an abrupt end to low inflation that saw years of meager COLA increases. Over the past 12 years, the average adjustment has been just 1.4%. In 2021, recipients received an increase of just 1.3%, or about an extra $20 a month for retirees. 


The adjustment will affect about 70 million people, including Social Security recipients, disabled veterans and federal retirees. About half of seniors live in households where Social Security benefits provide at least half of their income, while roughly 25% rely on the monthly payment for nearly all of their earnings.

The annual Social Security change, which is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, comes as the nation grapples with unusually high inflation. 

Consumer prices have climbed dramatically over the past few months, an increase that Federal Reserve Chairman Jerome Powell has attributed to pandemic-induced disruptions in the supply chain, a shortage of workers that's pushed wages higher and a wave of pent-up consumers flush with stimulus cash. Everything from gasoline to toilet paper to groceries costs more now with the highest inflation rate in more than a decade. 

Still, Powell and other Fed officials have mostly said they expect elevated inflation to be transitory and to fade as the economy continues to recover from the pandemic. 


Since 2000, Social Security benefits have lost roughly 30% of their purchasing power due to inadequate adjustments that underestimate inflation and rising health care costs, according to the Senior Citizens League, a nonpartisan advocacy group. The group has pushed Congress to adopt legislation that would index the adjustment to inflation specifically for seniors, such as the Consumer Price Index for the Elderly, or the CPI-E. That index specifically tracks the spending of households with people aged 62 and older.

"Over the past 21 years, COLAs have raised Social Security benefits by 55 percent but housing costs rose nearly 118 percent and healthcare costs rose 145 percent over the same period," said Mary Johnson, an analyst at the group. "Even worse, it appears that inflation is not done with us yet, and the buying power of Social Security benefits may continue to erode into 2022."

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