By RICARDO ALONSO-ZALDIVAR and Christopher Ragber
WASHINGTON (AP) — Millions of retirees on Social Security will see a 5.9% increase in benefits for 2022. The biggest cost adjustment in 39 years follows an explosion in inflation as the economy struggles to overcome the drag of the coronavirus. global pandemic.
COLA, as it’s commonly called, amounts to an additional $92 per month for the average retired employee, according to the Social Security Administration’s Wednesday estimates. This is a sudden break from a long lull in inflation, which has seen cost adjustments on average only 1.65% per year over the past 10 years.
With the increase, the estimated average Social Security payment for a retired employee would be $1,657 per month over the next year. A typical couple’s benefits would increase from $154 to $2,753 per month.
But that’s only to help offset the rising costs that recipients are already paying for food, gasoline and other goods and services.
“It goes by very quickly,” retiree Cliff Rumsey said of the rising cost of living. After a career in sales for a major steel manufacturer, Rumsey lives near Hilton Head Island, South Carolina. He takes care of his wife of nearly 60 years, Judy, at home, who has been diagnosed with Alzheimer’s disease. Since the coronavirus pandemic, Rumsey said she also noted price increases for wages paid to caregivers who sometimes pay for personal care products for her and Judy.
COLA affects the household budget for 1 in 5 Americans. This includes Social Security recipients, disabled veterans and federal retirees, about 70 million people. For baby boomers starting retirement within the past 15 years, this will be the biggest increase they’ve ever seen.
Among them is Kitty Ruderman of Queens in New York City, who retired from a career as an executive assistant and has been collecting Social Security for nearly 10 years. “We wait every year to hear what the increase is going to be, and every year it has been so insignificant,” she said. “This year, thank God, it will make a difference.”
Ruderman says she schedules her grocery shopping to take advantage of the midweek senior citizen discount, but the price hike has been “excessive” nonetheless. She says she doesn’t think she can afford a drug that her doctor has recommended.
AARP CEO Joe Ann Jenkins called the government payment increase “important for Social Security beneficiaries and their families as they try to keep up with rising costs.”
Policymakers say the adjustment is a safeguard to protect Social Security benefits against loss of purchasing power, not a pay increase for retirees. About half of senior citizens live in homes where Social Security provides at least 50% of their income, and one-quarter depend on their monthly payments for all or almost all of their income.
“You never want to underestimate the importance of COLAs,” said retirement policy expert Charles Blahaus, a former public trustee who helped oversee Social Security and Medicare finance. “What people can buy is greatly influenced by the number that comes out. We are talking about living requirements in many cases.”
This year’s Social Security Trustees report warns about the long-range financial stability of the program. But little has been talked about reforms in Congress, with lawmakers consuming President Joe Biden’s largely domestic legislation and partisan conspiracy over the national debt. Social Security cannot be addressed through the budget reconciliation process Democrats are trying to use to deliver on Biden’s promises.
Social Security’s turn will come, said Representative John Larson, D-Conn., chairman of the House Social Security subcommittee and author of legislation to tackle shortages that would leave the program unable to pay full benefits in less than 15 years. . His bill would raise payroll taxes, while also changing the COLA formula to give more weight to health care expenses and other costs that fall more heavily on the elderly. Larsen said he intends to move on next year.
“This one-time shot of cola is not the antidote,” he said.
Although Biden’s domestic package includes a major expansion of Medicare to cover dental, hearing and vision care, Larson said he hears from constituents feeling neglected by senior Democrats.
“At the town hall and tele-town hall they’re saying, ‘We’re really happy with what you did on the child tax credit, but what about us? Larson said. “In the mid-term elections, this is a very important constituency.”
COLA is only one part of the annual financial equation for seniors. An announcement about Medicare’s Part B premiums they pay for outpatient care is expected soon. It’s usually an increase, so at least any Social Security increase gets eaten up by health care. Part B premiums are now $148.50 per month, and the Medicare Trustees Report forecasts an increase of $10 for 2022.
Economist Marilyn Moon, who also served as public trustee for Social Security and Medicare, said she believes the current surge of inflation will be temporary due to highly unusual economic conditions.
“I think there’s going to be growth this year that you won’t see again in the future,” Moon said.
But policymakers should not delay working on retirement programs, she said.
“We are in a time where people do not respond to policy needs until there is a sense of hopelessness, and both Social Security and Medicare are programs that benefit from long-range planning, rather than short-range conspiracies. from,” she said. .
Social Security is financed by payroll taxes collected from workers and their employers. Each pays 6.2% on wages up to a limit, which is adjusted for inflation each year. Next year the maximum amount of income subject to Social Security payroll taxes will increase to $147,000.
The financing plan dates back to the 1930s, the brainchild of President Franklin D. Roosevelt, who believed that a payroll tax would foster a sense of ownership among average Americans that would protect the program from political interference.
That argument still resonates today. “Social Security is my lifeline,” said New York retiree Ruderman. “This is what we worked for.”