Millions of Americans collecting Social Security and Supplemental Security Income (SSI) will get a 5.9% bump in 2022, the highest inflation adjustment in 40 years.

The 5.9% COLA will be effective with benefits payable in January to more than 64 million Social Security beneficiaries. Also, the increased payments to more than eight million SSI beneficiaries will begin on December 30, the release said, noting that some people receive both Social Security and SSI benefits.

The annual increase is tied to the Consumer Price Index as determined by the Department of Labor’s Bureau of Labor Statistics, and some other adjustments that take effect in January of each year are based on the increase in average wages.

Based on that increase, the maximum amount of earnings subject to the Social Security tax (taxable maximum) will increase to $147,000, a release from the Social Security Administration said. That is up from $142,800.

For workers younger than the full retirement age of 66 or 67 (depending on their birth year), the release noted that their earnings limit will increase to $19,560. And people reaching their full retirement age in 2022 will see their earnings limit increase to $51,960. The release added that there is no limit on earnings for workers who are at full retirement age or older for the entire year.

“This would be the highest COLA that most beneficiaries living today have ever seen,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League. Johnson noted that COLA has averaged 1.4% over the past 12 years. The COLA in 2021 was 1.3% and raised average benefits by about $20, she said. The 2022 COLA, she said, will increase an average monthly retirement benefit of $1,565 to roughly $1,657, an increase of $92.

But Johnson said while the increase is welcome, Social Security recipients are still feeling the effects from rampant inflation because COLAs have not kept pace with some of the fastest growing costs of older households. “Over the past 21 years, COLAs have raised Social Security benefits by 55% but housing category costs rose nearly 118% and healthcare costs rose 145% over the same period,” Johnson said, noting that these are two categories that are not adequately accounted for in the COLA.

She said with the higher COLA alone, many seniors will not be able to catch up. “COLAs are intended to protect the buying power of Social Security benefits, but, according to consumer price data through July of 2021, Social Security benefits have lost nearly one-third of their buying power, (32%), since 2000, about the length of a typical retirement,” she said.

“Even worse, it appears that inflation is not done with us yet, and the buying power of Social Security benefits may continue to erode into 2022,” Johnson added. Inflation is expected to continue well into next year.

The Consumer Price Index, released today by the Labor Department, shows a slight increase in inflation in September, as food and energy prices rose. The CPI for all items rose 0.4% for the month and on a year-over-year basis, prices increased 5.4%. However, excluding volatile food and energy prices, the CPI rose 0.2% on the month and 4% from a year earlier.

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