It’s official: Social Security recipients are getting their biggest increase next year since President Ronald Reagan’s first term.
On Wednesday, the Social Security Administration announced more than 70 million Americans will see their benefits rise 5.9% next year. That’s up from 1.3% in 2021, and 1.6% in 2020. It also marks the biggest uptick since the 7.4% jump in 1983.
On Dec. 30, this 5.9% cost-of-living adjustment (COLA) will be reflected on the checks of the nation’s 8 million Supplemental Security Income (SSI) beneficiaries. Then in January, it will get added to the checks of the more than 64 million Social Security beneficiaries. According to the Social Security Administration, some Americans get both benefits.
The bad news? This cost-of-living adjustment is only so large because, well, inflation spiked this year. At its last reading in September, the consumer price index—the government’s measurement for inflation—is up 5.4% year over year. For perspective, the average rate of U.S. Annual inflation this century is just 2.2%.
Seniors could certainly use this uptick: Prices for budget items ranging from food to used cars to rent are soaring.
The end of the COVID-19 recession, paired with the vaccine rollout, has seen the economy roar back. But that’s something the global supply chain simply couldn’t handle—thus causing shortages and delays for all sorts of components and commodities. Of course, higher demand and restricted supply is a perfect recipe for price spikes.
Earlier this summer, Federal Reserve Chair Jerome Powell called this spike in inflation a “transitory” event. Meaning, it will slow down once these supply-chain shortages are worked out. But recently, even some Federal Reserve officials are walking away from that assessment. At an event on Tuesday, Atlanta Federal Reserve president Raphael Bostic said this isn’t a “transitory” episode and price hikes “will not be brief.”
Then again, even if it isn’t transitory, Social Security recipients will be protected. Federal law ensures that if inflation (as measured by CPI) stays high next year, recipients would get another big benefit boost in 2023.
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