The Largest COLA Increase In 40 Years
America just got a raise. People who know me know that my grandmother, Marcella, meant the world to me. She is a big reason why I went into financial services. She lived the stereotypical 1950s existence. My grandparents were not wealthy at all, so she worked hard to provide for her four children. She cooked, cleaned, and made sure her children were at church on Sundays. My grandfather, Frank, handled the finances for the most part. He farmed and did whatever else he could to earn money for the family. He wasn’t very successful, so when he died unexpectedly in 1982, it left my grandmother in a complicated financial situation.
My grandmother went back to work at the local university to help support herself. She even played bingo to try and win big. Like most Americans, when she turned 65, she turned on her Social Security and that became her primary source of income. Fortunately for me, she lived another 30 years and had a positive impact on my life, and I am thankful for that. Unfortunately for her, that meant she lived off Social Security for 30 years, and a 5.9% raise would have been a big deal to her.
On October 13, the United States government announced that it is increasing Social Security checks by 5.9% for 2022 payments to retirees, military members, people with disabilities and a few other groups. This is the largest increase since 1982, ironically the year my grandmother started Social Security.
This increase has created quite a stir around the country. Many clients have asked me if this applies to those who have yet to start taking Social Security. It does not. This applies only to Americans currently receiving Social Security benefits.
Each year, the Social Security Administration (SSA) releases a cost-of-living-adjustment (COLA) based upon the Consumer Price Index for Urban Wage Earners and Clerical Workers. They look at this index from July through September of the current year to determine the next year’s increase. The average retiree is receiving $1,565 per month and will get a $92 increase because of this COLA adjustment, boosting the payment to $1,657.
AARP CEO Jo Ann Jenkins said in a statement, “Social Security is the largest source of retirement income for most Americans and provides 90% or more of monthly income for one in four seniors.” This is a stark difference from the 1.4% average increase SSA has paid over the past 10 years. To put that in perspective, Social Security recipients have lost 32% of their buying power since 2000, according to USA Today.
Clearly, this is good news for Social Security beneficiaries, but it does indicate concern. In previous articles, I have noted that inflation is a primary concern of mine as we look to the future. This is a clear indicator that inflation is here — and isn’t something that could potentially be here — it’s here. When you are paying more at the register for the same basket of goods, that does not reflect positively on the economy. That is particularly true when you do not see wages go up.
In the case of Social Security, we are seeing wages go up, but the trick is to determine the net impact on your payment. Medicare Part B premiums are deducted from Social Security checks, and we have seen significant increases to Part B premiums over the past several years.
On October 4, my wife and I welcomed our fourth child and first daughter into the world, and we named her Marcella Varee LaBarge. She was named after my grandmother because of the tremendous person that my grandmother was and the positive impact she had on my life. I am thankful that she had a Social Security check each month so she could live independently and not with one of my aunts or uncles who lived out of state.
I’ll never forget the checks she used to write me for $5 or $10 from “bingo winnings,” and the checks would be a little bigger in the years she would receive larger Social Security payments because of COLA. Perhaps this year, I’ll write a check for 5.9% more to Marcella’s college fund in remembrance of my grandma.