Senior citizens and disabled workers could be looking at the biggest boost to their Social Security benefits in decades next year — thanks to hot inflation now.
Beneficiaries could see their benefits increase by 5.8% in January 2022, according to a Bank of America analyst note, which would be the biggest boost since 1983. That’s also quite a bit more than January 2021’s increase of 1.3% to the cost-of-living adjustment or COLA that hasn’t been enough to keep up with this year’s inflation.
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In June, the Bureau of Labor Statistics’ Consumer Price Index (CPI) — a key gauge of inflation — shot up to 5.4% from the previous year, marking the largest spike since August 2008. Some of the largest price increases were related to travel and cars, along with everyday items like laundry machines, bacon, fruit, and milk.
“This has important implications for both retirees and disabled workers getting Social Security and SSI benefits,” the note stated. “It means their budgets are being squeezed now, but improve a lot next year.”
That hike would translate to more than an additional $80 per month in benefits — a fourfold increase than the extra $20 beneficiaries saw in the monthly benefits this year, per Bank of America.
With more Social Security dollars to dole out next year — and inflation in 2022 expected to ease to 2.3% — there will be about a “$80 billion or so swing” in net tax benefits that will help sustain the recovery into next year, according to the Bank of America analysts.
“Seniors and the disabled will be doing their share in keeping the economy hot,” the note said.
The final say on the benefit increase rests with the Social Security Administration, which still has three additional months of data to collect before the official COLA percentage is determined.
COLA is measured by data fluctuations in the CPI, specifically those categorized as urban wage earners and clerical workers. A comparison is made in October using the CPI snapshot of the previous year’s third quarter and the current year’s third-quarter data; the change in growth, if any, determines the adjustment.