Inflation has been in the news more than usual, as we have seen spikes in the inflation rates during the COVID pandemic. Recent Consumer Price Index (CPI) data has led to an estimated 6.2% Social Security cost-of-living adjustment (COLA) for 2022, which could be the most significant cost-of-living adjustment to Social Security benefits in decades.
This giant raise for Social Security recipients is based on the latest estimate from the Senior Citizen League. The latest Social Security COLA estimate is up from the 6.1% estimate reported last month.
New Consumer Price Index data points to a possible 6.2% cost-of-living adjustment for Social Security recipients for 2022, according to the latest estimate from the Senior Citizens League.
If you are retired and living on a fixed income, you might be feeling the pinch of the increase in the cost of the items you purchase. Hopefully, the official Social Security cost-of-living adjustment will offer some relief for retirees. The Social Security Administration will release the official COLA in October. This raise for Social Security recipients will be based on the average of July, August, and September CPI data.
How Much Does The Social Security COLA Matter For Retirees?
In 2021, the Social Security cost-of-living adjustment was a measly 1.3%. That resulted in an increase of about $20, per month, for the average Social Security recipient. In case you were wondering, the average Social Security benefit in 2021 is just $1,543 per month. In 2022, if the Social Security raise is 6.2%, the average recipient will receive a little more than $95 per month.
Many of the goods retirees spend money on have been driving the increases in the Consumer Price Index. Gas, food, housing, and medical care are some of those items.
Norman Lear and Jane Fonda are both long time Social Security recipients and both could benefit from … [+]
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Will Social Security COLA Increase Retirees’ Taxation?
Another drawback to the inflation-led Social Security cost-of-living adjustment is an increase in taxes on Social Security benefits. While the Social Security COLA does not directly change the tax rates of Social Security taxation, it does help push more retirees’ incomes above the income thresholds which require Social Security taxation.
It does not take much for some or all your Social Security income to be taxable. If you file a federal tax return as an “individual” and your combined income is between $25,000 and $34,000, you will likely owe federal income taxes on half of your benefits. More than $34,000: up to 85% of your benefits may be taxable. For those who select “married filing jointly” and who have a combined income between $32,000 and $44,000, you may have to pay income tax on up to 50% of your Social Security benefits. Have a combined income of more than $44,000 up to 85% of your Social Security retirement income could be subject to taxation at the federal level.
For many current and future retirees, Social Security income will be their biggest retirement asset. Take the time to have a plan to maximize the value of your Social Security retirement benefits. Get the help of a trusted fiduciary financial planner to avoid the various mistakes people make when managing their Social Security benefits themselves. You worked hard for decades to accumulate your Social Security retirement benefits, take the time to optimize your retirment income and Social Security benefits.