The approximately 70 million Americans drawing core Social Security benefits and Supplemental Security Income (SSI) payments will see their benefits grow by 5.9% in 2022.
These federal benefits increase when the cost of living rises, as measured by the DOL’s Consumer Price Index for Urban Wage Earners and Clerical Workers, known as the “CPI-W.”
As the Social Security Administration’s announcement explains, the CPI-W rises when inflation increases, leading to a higher cost of living. This change means prices for goods and services, on average, are a little more expensive, so the cost-of-living adjustment (COLA) helps to offset these costs.
The Social Security Administration will mail COLA notices throughout the month of December to retirement, survivors and disability beneficiaries, SSI recipients, and representative payees. If these payees want to know their new benefit amount sooner, they can obtain a secure Social Security COLA notice using the Message Center in the online Social Security account portal. Increase information will be available online in early December prior to the mailed notice.
The Social Security benefit announcement comes at a time when Americans are increasingly worried about retirement risks related to market volatility, inflation and COVID-19. One recent study from Allianz Life found that more people—54% in the third quarter—were worried that a big market crash is in on the horizon, compared with 45% in the second quarter and 52% in the first. According to the study, these worries came as cases of the Delta variant were on the rise and as the markets continued their volatile trajectory.
“People were feeling better about market risks to their retirement this summer when we saw that brief return to normalcy before getting a Delta-driven reality check,” says Kelly LaVigne, Allianz Life vice president of consumer insights. “Now, nearly seven in 10 (69%) say they are worried that the increase in COVID infections will cause another recession.”
In related comments shared with PLANADVISER, Caleb Thibodeau, a global capital markets associate for Validus Risk Management, says the September Consumer Price Index (CPI) year-over-year increase of 5.4% adds to the series of upside inflation results over the past six months. While not a major overshoot compared with expectations, Thibodeau says the market appears to be becoming more apprehensive of continuingly high or “persistent” inflation numbers.
“Previous contributions to a higher CPI came predominantly from transitory reopening imbalances, such as airfares, hotel rates or used cars,” he says. “More than half of the 0.4% month-over-month increase for September was from increases in food or shelter-related costs, which is a marked shift toward non-transitory price increases. While the Federal Reserve continues to encourage inflation in order to achieve ‘price stability’ as one of its two main mandates, a shift to non-transitory inflation could be problematic and force monetary tightening on a more shortened timescale.”