In 2022, the Social Security benefits will be increased which can certainly prove to be the highest rise in the last four decades. Although the yearly rise might be as high as 6.2 percent as a result of inflation, that monthly payment may not go to the extent you believe.
The basis for Computation of Cola for 2022
The cost-of-living adjustment popularly known as COLA of the Social Security, which is computed every year through the use of the Consumer Price Index for Urban Wage Earners and Clerical Workers, will be evaluated for the next year based on the data from the third quarter as reported by CNBC.
Also, as per the statement made by AARP, the Social Security administration generally declares the total of the yearly adjustment in October. And the boost in benefits generally comes into effect in January.
An Increase of 6 Percent Does Not Mean Higher Income
Though a rise in benefits by a whopping 6 percent may appear consequential and extraordinary the same doesn’t appropriately indicate higher income to people. As said by the research associate at the Center for Retirement Research at Boston College, Patrick Hubbard, “Everything is 6% more expensive these days and is only the minimum needed to maintain the purchasing power that you’ve had all along.”
What Data Has Been Provided by CNBC From the Study of 20 Years, Starting From the Year 2000?
According to research from the Center for Retirement Research, two other elements that can cause the decline of the value of that rise are taxes and Medicare Part B premiums. Both of these factors also rise every single year and Part B premium payments are typically cut back from the monthly payment of the Social Security recipients.
The sum paid by an individual for Medicare Part B premium is generally dependent on their earnings. In the year 2021, the amount to be paid for monthly premium by a single individual who is earning an income of up to $88,000 is $148.50 and the payable amount is also the same for the married couples earning an income of up to $176,000.
Also, as per the report provided by CNBC, if we compare the data from 2000 to 2020, on average the yearly boost in Social Security benefits is about 2.2 percent whereas when it comes to Medicare Part B payments the raise is nearly 5.9 percent.
Patrick Hubbard said to CNBC that “There is this increase in the benefit, but because it’s eroded by Medicare premiums, it’s not nearly fast enough to keep up with what inflation would be.”
What Has Been Claimed by the Chief Economist at Moody’s Analytics, Mark Zandi?
The constant increasing prices of goods are also one of the factors causing higher COLA anticipation. Before this month, it has been reported by the Labour Department that July consumer prices were raised by 5.4 percent every single year. According to AARP, the chief economist at Moody’s Analytics, Mark Zandi claimed that “Higher prices reflect the disarray caused by the pandemic.”
He further continued to explain that it is estimated that the rate of inflation will fall to nearly 2 percent in the next year since supply and demand neutralizes, this will certainly result in the increase of 6.2 percent to COLA the special case and not the law.