According to Wednesday's estimates by the Social Security Administration, the COLA, or as it is commonly known, amounts to $92 per month for an average retired worker. This marks a sudden break from the long-term lull of inflation, which saw cost–of-living adjustments average just 1.65% per year for the past 10 years.
The average Social Security payment for retired workers will rise to $1,657 per month in the next year. The average couple's monthly benefits will increase by $154 to 2,753 per month.
However, this is only to offset the rising cost of food, gasoline, and other goods and services that recipients already have to pay.
Cliff Rumsey, a retired sales executive, said that the cost-of living increases have been quite rapid. Rumsey, who worked as a sales representative for a major steel manufacturer, now lives on Hilton Head Island in South Carolina. Rumsey cares for Judy, his wife of 60 years. Judy has Alzheimer's disease. Rumsey stated that he has noticed an increase in the cost of wages for caregivers who sometimes spell him, as well as personal care products for Judy, since the coronavirus pandemic.
About 1 in 5 Americans are affected by the COLA. This includes Social Security beneficiaries, disabled veterans, and federal retirees, which is nearly 70 million people. It will be the largest increase in retirement income for baby boomers who have retired within the last 15 years.
Kitty Ruderman, Queens in New York City is one of them. She retired as an executive assistant after a long career and has been collecting Social Security benefits for around 10 years. She said, "We wait to see every year what the increase will be, but every year it has been so insignificant." It will make a difference this year, thank you very much.
Ruderman claims she timed her grocery shopping to get senior citizen discounts midweek, but she says the price hikes have been "extreme". She also says that she doesn't believe she can afford the medication her doctor recommended.
Jo Ann Jenkins, CEO of AARP, called the increase in government payments "crucial" for Social Security beneficiaries and their families to help them cope with rising costs.
The COLA, according to policymakers, was created as a way to safeguard Social Security benefits from the loss of purchasing power and not as a pay increase for retirees. Half of seniors live in households where Social Security payments provide at least 50% of their income. One-quarter of them rely on their monthly payment to cover all or almost all of their income.
Charles Blahous is a retired policy expert who helped to oversee Medicare and Social Security finances. The number of COLAs issued has a profound impact on what people can buy. In many cases, we are talking about the basic necessities of life.
The Social Security trustees' report this year emphasized the need to ensure long-term financial stability. However, Congress is not discussing fixes due to the massive domestic legislation and partisan machinations regarding the national default. The budget reconciliation process Democrats have attempted to use to address Social Security is not the best way to solve it.
Social Security's time is coming, according to Rep. John Larson (D-Conn), chairman of the House Social Security subcommittee, and author of legislation to address shortfalls that could leave the program unable pay full benefits in less 15 years. His bill would increase payroll taxes and change the COLA formula so that more weight is given to health care costs. This will help seniors who are more burdened by the cost of living. Larson stated that he plans to push ahead next year.
He said, "This is not an antidote."
Larson stated that although Biden's domestic package contains a significant expansion of Medicare for dental, hearing, and vision care, he hears from constituents complaining about seniors feeling neglected by Democrats.
Larson said, "In town halls, and tele-townhalls, they're saying: 'We're really happy with your work on the child credit, but what about you?'" This is an important constituency in a midterm election."
The COLA is just one component of the annual financial equation that seniors have to face. Soon, there will be an announcement on Medicare's Part-B premium for outpatient healthcare. This is usually an increase so at least part of any Social Security increases goes to health care. The Part B premium now stands at $148.50 per month. Medicare trustees have estimated that there will be a $10 increase in 2022.
Marilyn Moon, an economist who was also a public trustee for Medicare and Social Security, stated that she believes the current inflation is an adjustment to extremely unusual economic conditions and that the pattern of price restraint will continue to reaffirm itself with the passage of time.
Moon stated that he believes there will be an increase in this year's population, which won't be repeated in the future.
She said that policymakers shouldn't delay starting to work on retirement plans.
She said, "We are at a point where people don’t react to policy needs until they feel desperation. Both Social Security and Medicare benefit from long-range planning rather than short-range machinations."
Payroll taxes are collected from employees and employers to finance social security. Each worker pays 6.2% on their wages up to a limit, which is adjusted annually for inflation. The maximum earnings that are subject to Social Security payroll taxes for the next year will be $147,000
The financing scheme dates back to the 1930s. was the brainchild President Franklin D. Roosevelt. believed that a payroll tax would encourage an average American sense of ownership, which would help protect the program against political interference.
This argument is still valid. Ruderman, a New York retiree, said that Social Security was his lifeline. It's what we have worked for.