Over 50 million Americans rely on Social Security for at least a portion of their retirement income. When you consider that 180 million people have paid into the system — and hope to collect checks someday — it’s clear the federal program serves as the foundation of many Americans’ retirement plans.
There are changes to keep in mind in the new year.
The maximum possible Social Security benefit for someone who retires at full retirement age will be $3,345 in 2022, up $197 from 2021.
The average Social Security benefit for retired workers is expected to climb by $92 to $1,657 per month due to the cost-of-living adjustment. Married couples in which both spouses receive benefits will see an estimated $154 increase to an average payment of $2,753 per month in 2022. But remember part of your cost-of-living adjustment could be used to pay for Medicare premiums.
COLA hike won’t cover inflation
Social Security payments are adjusted each year to keep pace with inflation as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers. Existing Social Security recipients will see their benefits increase by 5.9% in 2022, a significantly larger adjustment than the 1.3% COLA in 2021.
The 2022 adjustment is the highest in decades, but it’s not enough to keep pace with overall inflation faced in 2021. According to the Bureau of Labor Statistics, the general Consumer Price Index increased 6.8% in the 12 months through November 2021.
As if trailing inflation weren’t enough of a problem, many Social Security recipients won’t see that the entire increase in their benefit checks. Medicare Part B premiums are increasing by more than 14% to $170.10 per month from $148.50 per month. People who are signed up for both Social Security and Medicare have their Part B premiums paid directly from their Social Security benefit. As a result, those folks will likely see less of an increase in their take-home benefit amount than they might expect.
The Social Security Administration posted personalized COLA notices online in December. You can view the benefit by logging into your My Social Security account.
Joan Koczor is a senior advocate and a member of the Age-Friendly Maricopa Advisory Board.
This column was first published in the February edition of InMaricopa magazine.