Recipients of social security may receive a larger change in the cost of living next year if current economic developments continue.
But how much these monthly benefit increases continue will depend a lot on inflation.
The Senior Citizens League, an impartial senior group, released its first official assessment for 2022 on Wednesday, indicating benefits could fall by 4.7% from next January.
If this estimate is correct, it would be the largest increase for retirees and other beneficiaries since 2009, when benefits rose by 5.8%. In 2021, the change in the cost of living of social security was 1.3%.
The increase is based on the latest Bureau of Labor Statistics data in the Consumer Price Index (CPI-W) for urban wage earners and office workers. Using this index, the Social Security Administration calculates its change in the cost of living annually.
This estimate is certainly preliminary and is subject to change. The actual COLA for next year is based on third quarter data.
The current estimate is based on a 12-month average inflation forecast based on April data, according to The Johnson, Mary Johnson, a social security and Medicare policy analyst at The Senior Citizens League.
Most of the data that affected the estimates is related to rising energy and gasoline prices, Johnson said.
As the data do not include May, they lack the aftermath of the recent cyber attack on a major U.S. fuel pipeline, which has led to gasoline and price spikes in certain parts of the country.
If inflation falls and the estimate stays the same, it will help improve the purchasing power of retirees, Johnson said.
“A lot depends on whether inflation remains after the announcement of COLA and then inflation starts to slow down again so that by January 2022 it will be lower than it is now,” Johnson said.
The Social Security Administration will typically announce next year’s change in October.
Consumer price data for May show that social security recipients have lost their purchasing power, according to A Senior Citizens League survey.
If current inflation trends continue, “the loss of purchasing power could grow deeper in 2021,” Johnson said.