Social Security beneficiaries could be looking at a very welcome bump of 8.7% in their benefits starting in January next year, if current trends continue.
That hike would be the biggest since 1981, and would be worth an extra $144 a month for a retiree on the average monthly benefit of $1,656.
These numbers are the latest projection from the Senior Citizens League, a nonprofit, and are based on the government’s inflation data over recent months.
Read: The hottest US inflation in 40 years shows little sign of cooling off
These are only projections, and we won’t get the official figures until next month. The annual “cost of living adjustment,” or COLA, is based on inflation data for the months of July, August and September, and is applied to checks that start going out the following January.
If retirees get this level of boost it won’t be a moment too soon. One problem with these adjustments during a period of rising inflation is that they are always behind the eight ball. So this year retirees got a 5.9% adjustment, which was huge by the standards of recent decades but which was already out of date by the time they got it: Official inflation in January was 7.5%, and since then it’s headed higher.
Put another way, Social Security beneficiaries have to deal with 2022 inflation with 2021 inflation adjustments. The Senior Citizens League calculates that already, through August, the average beneficiary is $418 out of pocket as a result.
This is one of the ways that inflation cheats Social Security beneficiaries. Another, of course, is that when Alan Greenspan’s commission back in the 1980s introduced the taxation (actually, the double taxation) of Social Security benefits, they cleverly didn’t index the tax thresholds. So taxes that were initially only applied to the top 10% of Social Security beneficiaries now applied to about half, and at current rates it will soon apply to most.
As ever, beneficiaries will have to take what they can get.