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2022 Social Security COLA Estimated at 4.7%

Next year’s cost-of-living adjustment (COLA) for Social Security—a precursor of what can be expected for retirement plan contribution and benefit limits—could be the highest since 2009. 

According to estimates by The Senior Citizens League (TSCL), Social Security recipients may get a 4.7% COLA in 2022. Based on consumer price index data through March 2021, the study suggests that the next COLA will be considerably higher in 2022 than the 1.3% COLA paid in 2021. 

Findings in the organization’s “2021 Social Security Loss of Buying Power” study show a temporary improvement in the buying power of Social Security benefits, but an abrupt jump in inflation wiped out the temporary improvement. “While the lack of inflation in 2020 did improve the buying power of Social Security benefits by two percentage points through the month of January 2021—from a loss in buying power of 30% to a loss of 28%—that improvement was completely wiped out by soaring inflation in February and March of this year,” says Mary Johnson, a Social Security policy analyst for TSCL.

Now in its 12th year, the study looks at 39 expenditures that are typical for people age 65 and up, comparing the growth in the prices of these goods and services to the growth in the annual COLAs. It found that consumer price data through March 2021 indicate that Social Security benefits have, once again, lost 30% of their buying power and “that loss of buying power could grow deeper in 2021, should the current inflationary trends continue,” adds Johnson.  

The organization notes that with such a high level of inflation volatility, this estimate could change several times before the COLA is announced in October 2021. The study further notes that since 2000, COLAs have increased Social Security benefits a total of 55%, yet typical senior expenses through March 2021 grew 101.7%. The average Social Security benefit in 2000 was $816 per month; that benefit grew to $1,262.40 by 2021 due to COLA increases. 

But because retiree costs are rising at a far more rapid pace than the COLA, the study suggests that a Social Security benefit of $1,645.60 per month in 2020 would be required just to maintain the same level of buying power as in 2000.