Here is a look at the 2022 Cost-of-Living Adjustment (COLA) increase.
The annual cost-of-living adjustment will increase by 5.9% in 2022 for nearly 70 million Social Security and Supplemental Security Income beneficiaries, the Social Security Administration announced on Wednesday, Oct. 13.
It’s the largest increase in 40 years. Soaring inflation, a resurgent economy and other factors contributed to the sizable COLA increase, according to the Social Security Administration.
Inflation was increasing at 6.9% in October, according to the Consumer Price Index for Urban Wage Earners and Clerical Works (CPI-W). Compiled by the U.S. Bureau of Labor Statistics (BLS), the CPI-W is the basis for COLA adjustments for military, federal and Social Security recipients.
The COLA adjustments are based on inflation as measured in the third quarter (July, August and September) compared to the third quarter from the previous year.
The BLS, a U.S. Department of Labor agency, released its Consumer Price Index (CPI) report including September 2021 in mid-October 2021.
2022 COLA (Cost-of-Living Adjustments) Increase Watch
2021 COLA & CPI Summary
- The October CPI-W (274.310) increased Year over Year by 6.9%.
- The Q3 CPI-W (271.889) increased Year over Year by 8.7%. The 2020 Q3 CPI-W was 250.3.
- Over the last 12 months, the all items index increased 6.2% before seasonal adjustment; this was the largest 12-month increase since 1990.
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8% in October on a seasonally adjusted basis after rising 0.4% in September.
- The June 2021 increase of 0.9% was the largest 1-month change since June 2008 when the index rose 1.0%
- The index for used cars and trucks increased by 2.5%, after dropping by .7%, in September.
- The food index increased 0.9% in October, following a 0.9% increase reported for September.
- The energy index increased 4.8.% in October, with the gasoline index rising 6.1% over the month.
- The index for transportation services, used cars and trucks, and energy services were among the few major component indexes which decreased in August.
- The all items index rose 6.2% for the 12 months ending October; it has been trending up every month since January, when the 12-month change was 1.4%.
- The index for all items less food and energy rose 0.6% in October after increasing 0.2% in September. Many of the same indexes continued to increase.
- The index for all items less food and energy rose 4.6% over the last 12-months, the largest 12-month increase since the period ending November 1991.
- The energy index rose 30% over the last 12-months, and the food index increased 5.3%.
The 2021 COLA increase for the 70 million Americans who rely on Social Security, VA disability compensation, military retirement and other government benefits was 1.3%. While many were hoping for a much higher increase in 2021 this is positive news that there will be any increase given earlier projections of no increase at all. COLA increases are based on the inflation measurement period of the 3rd quarter (July, August, and September) compared to the previous 3rd quarter.
“The 1.3% cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021.” ~ SSA statement
#BREAKING! Approximately 70 million Americans will get a 1.3% increase in monthly #SocialSecurity benefits and #SSI payments in 2021. Check our blog later this morning for more information: https://t.co/42WeesNNHV #COLA #2021COLA pic.twitter.com/BpK20EC2av
— Social Security (@SocialSecurity) October 13, 2020
2022 Cola Effective & Payment Dates:
- Retired military veterans, U.S. Department of Veterans Affairs (VA) rates for compensation and pension for disabled veterans and surviving families are effective Dec. 1, 2021, and will be reflected on the first check to be paid on Dec. 31, 2021.
- Social Security benefits are effective beginning with December 2021 benefits, payable in January 2022.
- Federal Supplement Social Security Income and Social Security Disability Insurance (SSDI) payment levels are effective for payments made for January 2022.
2021 COLA (Cost-of-Living Adjustments) Increase Results
Q3 (July-Sept.) 2020 COLA & CPI Summary
- The Q3 (July-September) CPI-W (253.412) increased year over year by 1.28%.
- The September CPI-W (254.004) increased year over year by 1.18%.
- The August CPI-W (253.597) increased year over year by 1.39%.
- The July CPI-W (252.636) increased Year over Year by 0.96%.
- The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 % in September on a seasonally adjusted basis after rising 0.4% in August.
- A sharp rise in the used cars and trucks index was the largest factor, but the indexes for gasoline, shelter, recreation and household furnishings and operations also contributed
- The energy index rose 0.9 % in August as the gasoline index rose 2.0 %
- The food index rose 0.1 % in August after falling in July; an increase in the food away from home index more than offset a slight decline in the food at home index
- The food index rose 0.1 % in August after falling in July
- The energy index rose 0.9 % in August, its third consecutive increase
- The index for all items less food and energy increased 0.4 % in August after rising 0.6 % in July
- The all items index increased 1.3 % for the 12 months ending August; this figure has been rising since the period ending May 2020, when the 12-month increase was 0.1 %
- The index for all items less food and energy increased 1.7 % over the last 12 months
Veterans’ Compensation Cost-of-Living Adjustment Act of 2020 (H.R. 6168)
In September 2020, the Senate passed a cost-of-living increase for veterans benefits in 2021, so long as Social Security and COLA increased as well.
The legislation directed the VA to increase, as of Dec. 1, 2020, the rates for VA disability, additional compensation for dependents, the clothing allowance for certain disabled veterans and Dependency and Indemnity Compensation (DIC) for surviving spouses and children.
While Social Security benefits are automatically adjusted annually to keep pace with inflation, Congress must pass legislation annually to provide COLA for veterans and surviving family members receiving those types of compensation from VA.
Note: This does NOT guarantee an increase in 2021 for veterans but rather guarantees veterans will receive an increase if there is also a Cost-of-Living-Adjustment increase.
Why a COLA Increase May Not Help Social Security Recipients
If Medicare climbs at an equivalent or higher rate any increase may be offset by Medicare premiums. Additional senior citizen household spending has typically outpaced COLA because the measurement to determine COLA doesn’t reflect the expenses that impact seniors most, like healthcare (not a heavy COLA calculation) and gas (a heavy COLA calculation).
Will Chained CPI Replace CPI-W?
Chained CPI is a new method for measuring inflation and was recently adopted with the new tax plan. Chained CPI dampens inflation by as much as 0.2% to 0.3% which has many advocacy groups concerned that this method will carry over to COLA. Few people are against a better measurement of inflation, in fact, many advocacy groups believe even the CPI-W is not the best measurement for retirees, however, Chained CPI many contend would be a step backward.
COLA (Cost-of-Living Adjustments) are for the following individuals or areas:
- Retired Military Veterans
- Disabled Veterans – See VA Disability Rate Tables
- Veterans’ Pension Benefits – Veterans Pension Rate Tables
- Survivor Benefit Annuitants – Survivors’ Pension Rate Tables
- Surviving Families of Veterans – Parents’ Dependency and Indemnity Compensation (DIC) Tables
- Social Security recipients
- Federal Civilian Retirees
- Supplemental Security Income (SSI)
- Social Security Disability Insurance (SSDI)
- Eligibility for Medicare Extra Help and Medicaid
- Federal & State food and housing assistance programs
Quarterly CPI-W for 2020 & 2021
Monthly CPI-W for 2020 & 2021
|Month||2020 CPI-W||2021 CPI-W||YoY Increase/Decrease|
|2021 Official COLA Measurement – CPI-W
|Average (rounded to the nearest 0.001)||253.412||271.889|
|Inflation According to the CPI-W||1.3%||5.9%|
Quarterly CPI-W for 2019 & 2020
Monthly CPI-W for 2019 & 2020
|Month||2019 CPI-W||2020 CPI-W||YoY Increase/Decrease|
The table below shows estimated future cost-of-living adjustments (COLAs) as determined by assumptions in the 2021 Trustees Report.
COLA Estimates by Year
The Board of Trustees regards the intermediate estimates as their best estimates.
The CPI-W takes into account eight major spending categories:
- Food and beverages
- Medical care
- Education and communication
- Other goods and services
How COLA is Determined
The Cost-of-Living-Adjustment (aka Cost-of-Living Allowance) is determined by the Bureau of Labor Statistics’ Consumer Price Index (CPI-W). It is based on the percentage increase of the CPI-W from the 3rd quarter of the previous year versus the current year’s 3rd quarter (July, August, and September).
Veterans who retire during the current calendar year will receive a temporary partial COLA due to already receiving a military pay raise in January.
- The COLA increase is only set at the CPI-W if the increase is less than 2%.
- If inflation is between to 2 to 3% then COLA is set at 2%.
- If the CPI-W is greater than 3% then COLA is set at 1% below the CPI-W.
COLA Versus Federal Pay Increases
Pay increases for current federal workers and COLA for retired workers often differ because they are based on changes in different economic variables.
Federal Pay increases are based on changes in private-sector wages and salaries. Increases in pay for federal civil service workers, therefore, are indexed to increases in the wages and salaries of private-sector employees. The objective of the federal pay policy is to keep pay in the federal government competitive with pay in the private sector.
Cost-of-living adjustments (COLA) ensures that a retiree’s income will purchase the same amount of goods and services after years of retirement that it purchased at the start of retirement.
|History of COLA (cost-of-adjustments) since 1975|