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Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 5.9% in 2022, announced the Social Security Administration on October 13.

The 5.9% cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2022. Increased payments to approximately eight million SSI beneficiaries will begin on December 30, 2021.

The Social Security Act ties the annual COLA to the increase in the Consumer Price Index as determined by the Department of Labor's Bureau of Labor Statistics.

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 from $142,800.

Social Security and SSI beneficiaries are normally notified by mail starting in early December about their new benefit amount. Most people who receive Social Security payments will be able to view their COLA notice online through their personal My Social Security account. People may create or access their my Social Security account online at http://www.socialsecurity.gov/myaccount.

Information about Medicare changes for 2022, when announced, will be available at http://www.medicare.gov. For Social Security beneficiaries receiving Medicare, Social Security will not be able to compute their new benefit amount until after the Medicare premium amounts for 2022 are announced. Final 2022 benefit amounts will be communicated to beneficiaries in December through the mailed COLA notice and my Social Security's Message Center.

For more information, visit http://www.socialsecurity.gov/cola.

Cause for Celebration?

While retired and disabled Social Security recipients are looking forward to the largest adjustment since 1982, The Senior Citizens League (TSCL) has concerns about the amount.

"This would be the highest COLA that most beneficiaries living today have ever seen," said Mary Johnson, TSCL Social Security and Medicare policy analyst. "But a high COLA means exceptionally high inflation is impacting consumers."

TSCL reported that over the past 12 years, COLAs have averaged a meager 1.4%. The COLA in 2021 was just 1.3%, and raised average benefits by about $20. The 2022 COLA will increase an average monthly retirement benefit of $1,565 to roughly $1,657, an increase of $92.

While the high COLA is welcome, Social Security recipients are saying that years of low COLAs in the past made it next to impossible to cope with the rampant inflation of 2021, because COLAs haven't 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 costs rose nearly 118% and healthcare costs rose 145% over the same period," said Johnson, adding that these two categories are not adequately accounted for in the COLA.

"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 that inflation is expected to continue well into next year, and compiled a list of the spending categories that are likely to be the biggest challenge for older households in 2022:

Food: Normal food costs usually rise in the 1 to 2% range annually, but the USDA estimates that, in 2022, food-at-home prices are expected to increase between 1.5 and 2.5%, and restaurant prices are expected to increase between 3.0 and 4.0%.

Rental Housing: The standard lease for senior rental housing often includes a clause for annual rent increases of about 5%, but a growing number of older and disabled renters fear losing their rental apartments with projected rental increases of 7% and higher.

Owner Housing: Mortgage rates are expected to rise in 2022 in reaction to higher new home prices, the costs of building and materials, and rising interest rates. Higher prices of homes will also mean higher local real estate taxes and higher homeowners insurance costs.

Home Heating: With rising demand and shrinking inventories, the cost of heating a home with oil and natural gas this winter is expected to climb this winter by about 21 to 25%, according to the U.S. Energy Information Administration.

Drug Prices: The Centers for Medicare and Medicaid Services estimate that prescription drug plan premiums will increase almost 5% in 2022, and the Part D out-of-pocket threshold before reaching the catastrophic phase of coverage is growing by 7.6% from $6,550 in 2021 to $7,050 in 2022.