Whether you know it or not, Social Security has a huge role in helping to protect the financial well-being of America’s retired workers. When non-retirees workers were asked if they plan to use their Social Security income during their retirement, only 15% this year responded that it would not be necessary. Of the remaining people, 38% said it would be a “big” source of their income, which means an all-time high in this special poll.
Given the crucial nature of Social Security for retirees, there is arguably no announcement that is more awaited than the yearly cost-of-living adjustment, or as it’s known, COLA, which is given during the second week of every October.
Recently, it was announced that half the nation (around 169 million Americans), would mark a historic event next year.
On August 11, the Bureau of Labor published inflation data for July of this year. This report revealed that the CPI-W went up by 6% over the last 12 months. Keep in mind this is only one of the three data points needed to calculate an increase to Social Security in the form of a COLA. However, it means that the 2022 COLA could be the highest we have seen in a very long time.
According to The Senior Citizens League, which is a nonpartisan group that advocates for seniors, Social Security’s COLA is anticipated to increase by 6.2% in the next year. This would create the biggest jump in payouts since the 1982 COLA of 7.2%. In other words, the last time Social Security had a benefit increase this large, around 169 million Americans alive today were not even born.
If you are looking for a reason why prices are going up so quickly, transportation and energy can take a lot of this blame. In July, the CPI for All Urban Consumers (CPI-U), a measure that is similar to the CPI-W, had an unchanged 23.8% boost in energy prices over the previous 12 months. This is an end result of oil and natural gas costs rising greatly as economic activity has come back from its recession lows.
Likewise, transportation and vehicle costs are going sky-high. Prices of used trucks and cars showed a 41.7% increase in July (for the CPI-U) from the prior-year period, with transportation service expenses up 6.4%.
Author: Scott Dowdy