Personal Finance

Social Security cost-of-living adjustment could be 6.2% in 2022

Key Points
  • Social Security's annual cost-of-living adjustment for 2022 could be the highest it's been in years.
  • Based on the latest consumer price index data, beneficiaries could see a 6.2% boost next year.
  • The preliminary estimate is subject to change before next year's adjustment is officially calculated.
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New consumer price index data points to a possible 6.2% cost-of-living adjustment for Social Security recipients for 2022, according to the latest estimate from The Senior Citizens League.

That's up from a 6.1% estimate the nonpartisan senior advocacy group projected last month.

Social Security's annual COLA is calculated each year based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.

The official calculation, which is typically released by the Social Security Administration in October, is based on the average of July, August and September data.

"With one third of the data needed to calculate the COLA already in, it increasingly appears that the COLA for 2022 will be the highest paid since 1983 when it was 7.4%," said Mary Johnson, Social Security policy analyst at The Senior Citizens League.

In 2021, the Social Security COLA was 1.3%. For the average retirement benefit, that amounted to $20 more per month for a total of $1,543.

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Still, a more generous 6.2% raise for next year may not exactly be cause for celebration. The reason: rising inflation, which is pushing prices higher.

Gasoline, for example, has risen 41.8% over the past 12 months, and is helping to push the COLA estimate up, according to The Senior Citizens League.

The broader consumer price index rose 5.4% in July compared to a year earlier, driven mostly by rising food and energy prices, according to data released by the Bureau of Labor Statistics on Wednesday.

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Any changes in Federal Reserve policy that could affect inflation would not likely come until after the final Social Security COLA for next year is announced.

Most of the central bank's focus has been on helping people return to work, rather than on price increases that are perceived as temporary, noted Greg McBride, senior vice president at Bankrate.com.