Social Security payments could rise over 6% next year

Workers who aren’t getting an equally large raise are essentially seeing their buying power decrease. Luckily for retirees, Social Security benefits get a cost-of-living adjustment (COLA) each year.

At the current pace of inflation, the Senior Citizens League estimates that the COLA bump would be 6.1% in 2022. That would be the highest increase since the early 1980s for Social Security recipients.

The more than 65 million Americans on Social Security rolls won’t know the actual 2022 COLA bump until the Social Security Administration announces the rate in October. Once COLA is confirmed, it will go into effect in January 2022.

If COLA actually jumps 6.1%, it would represent a major increase compared with past years. At the beginning of 2021, Social Security recipients saw a 1.3% uptick. The average annual increase since 2000 was just 2.1%. Why? For the most part, inflation has been pretty tame over the past couple of decades. In fact, three times in the years following the Great Recession seniors got no COLA bump. Meanwhile, back in the ’70s and ’80s—a period marked for high inflation—annual COLA increases of over 5% were the norm.

But if inflation weakens in coming months, that COLA bump could deflate.

Federal Reserve Chair Jerome Powell reaffirmed his belief to Congress last month—and again yesterday—that this rise in inflation is “transitory” and it will cool once pent-up demand runs its course. However, inflation has yet to slow down. We won’t get the next CPI reading until Aug. 11.