One of Highest COLAs Ever Announced
Category: Medicare
October 13, 2022 — It has been four decades since the Social Security COLA (Cost of Living Adjustment) was this high. The government announced the increase today, which came in as widely expected at 8.7%. The rate was calculated on a formula based on current rates of inflation. For a person who gets the average 2022 benefit of $1614/month, that amounts to a $144 monthly increase, or $365 per month for someone earning the maximum benefit at age 70. Last year the COLA was 5.9%
The increased payments will begin this January and are expected to help retirees cope with the high inflation we have seen since the start of the pandemic. While the increases will be appreciated, the Elder Index shows that Social Security benefits only cover about 68% of expenses for a single person who rents their home. So retirees need to have either saved or keep working to maintain their standard of living.
The current estimate is that Social Security’s Trust Funds will be extinguished by 2035, a target which keeps changing based on employment levels and the impact of COLAs. At that time only about 70% of expected benefits will be paid, unless Congress acts, which they show no sign of doing.
On the good news front, the standard monthly Part B premium will drop by $5.20, to $164.90. Since those premiums are deducted from Social Security benefits, that is another small raise in the offing for next year!
Comments on "One of Highest COLAs Ever Announced"
Dan says:
This is not an exciting event for me as a federal retiree my health insurance premiums were increased by the same percentage thus it’s a wash and inflation will still erode my cost of living.
C Jordon says:
I totally agree with Dan's comment! There has been so much hoop-la about this COLA increase. The powers that be have already figured out a way to spend "your" increase! Insurances will go up, perhaps beyond the COLA increase, Medicare will probably increase, and corporate America continues to squeeze the general public for unwarranted price increases. Unless you are Jeff Bezos, Elon Musk, or some other overpaid corporate CEO, you will not benefit from the COLA!
Shumidog says:
Dan, I don't understand what you're saying. If you have a federal pension, both it and your SS go up by the COLA increase. Your Medicare deduction is not a percentage of your SS. It's a flat fee which depends on the amount of SS you receive. Are you saying that your health insurance takes your entire pension? That doesn't sound right. So you should be getting something.
Also, the standard deduction for your income tax goes up by this amount, too.
JLong says:
Federal employees to my knowledge do not collect Social Security and they have EXCELLENT Federal Healthcare coverage. My mother resides in a nursing home (widow) and had my father's Federal BCBS health plan for years with EXCELLENT coverage - never saw any bills from doctors except for minimal payments for prescription medications.
Shumidog says:
Jlong, that was changed at least 35 years ago when we went to the new system. Congress wanted to shore up SS, so any new hires went into a new pension system where we contributed to SS and as soon as we were eligible for SS (age 62) our pension was reduced by the amount of SS we received, or would receive.
As for Healthcare coverage, it depends on which plan you have, if you have kept gov't coverage. There are at least 9, and those open to everyone are pretty basic and the better ones are expensive.
Working for the Fed Gov't is not nearly as lucrative as you're imagining.
JLong says:
Shumidog - thank you very much for that clarification. I was really dating myself from MANY years ago with my parents. My father was fortunate to get employment in federal govt post WWll navy veteran. He was never allowed to collect SS benefits but was provided with excellent healthcare coverage IMO. It was
extended to cover my mother after his death in 2010. She is now age 96 in NH.
JCarol says:
I can't comment on how it works for federal retirees who also receive a federal pension, but as a member of the vast majority of retirees without pensions - federal or otherwise - this COLA is very welcome.
Savings interest rates are creeping up slowly, but at nowhere near the pace needed to offset the sharp increases in home & auto insurance and utility bills, grocery shopping, home repairs, appliance replacements, and virtually everything else.
This bump will help cover some of those increases and I'll be grateful to get it.
Alex says:
I am not retired but in my late 50's and pay attention to all that is going as I know the time will come for me, but right now it is mainly to help my uncle who is able to live alone and does well but is at an age where I know he appreciates any help I can give him concerning SS and cost of living, Medicare, etc. H Which is why I became a member of this site a few years back. This short and informative blog is much appreciated and I printed it out, took it to him and discussed it. We both appreciate that it is not wordy and explains it well. He has always been a person whose glass is half full, so he appreciates the news with no complaints, and like JCarol he will be grateful.
Jennifer says:
I, too, have no pension as 90 percent of the population does not, I am a former nurse and do have a 401K and an IRA but it is not keeping up with the expenses. I am very grateful for the increase in social security benefits as I can really use the money which will be eaten up by the expenses that have increased. I do work a part-time job as well for social interaction and a little bit of money to help.
UncleAL says:
hello....it appears there is erroneous information submitted October 16....Among working-age individuals (ages 15 to 64), the most common type of retirement accounts in 2020 were 401(k)-style accounts (34.6%). About 18% of working-age individuals had an IRA or Keogh account, and 13.5% had a defined-benefit or cash balance plan." based upon Tax Policy Center August 30,2021. Additionally, Also, on July 30, 2022 "On average, Americans have around $141,542 saved up for retirement, according to the “How America Saves 2022” report compiled by Vanguard, an investment firm that represents more than 30 million investors. Additionally,77% of Americans having retirement plans." Most problems arise from workers just not preparing for their later years in life (excluding health and or death).
UncleAL says:
Oh, I forgot.....the SS benefits raise of 8.7% is paltry compared how much our life's costs went up....
Jennifer says:
There will always be those who cannot save enough for their retirement. Defined pension plans only apply to a very small part of the population and that is not erroneous! Those who are between 15-64 still have a bit of time to squirrel away money if their investments do not deplete their accounts.. I still save since I have a part-time job so as to keep up with the rising expenses and I still am grateful for the increase in the COLA for social security. Life happens to many people and that can affect their finances. Those with guaranteed pensions have it better in many but not all cases.
Louise says:
With this being the highest COLA in 4 decades, would it be advantageous for those waiting to collect Social Security at an older age to apply now so they can get this large COLA benefit?
For me, it bumps my SS up $160 a month/$1,920 yr. For the Hub, it bumps him up $194 a month/$2,328 yr.
John Brady says:
To answer Louise, you make a great point. The COLA is yet another good reason to delay taking SS as long as you can, up to age 70. The higher your benefit, the greater the $ amount of the COLA. For example, on the average 2022 benefit this year's COLA amounts to a $144 monthly increase, vs. $365 per month for someone earning the maximum benefit at age 70.
Louise says:
This is an interesting article:
https://www.helpwithmysocialsecurity.com/post/social-security-colas-for-ages-60-62