You may be surprised when you get your first Social Security retirement benefits check. The check will not be the same amount as the last one.
If you're wondering why your Social Security Administration benefits will go up next year, there's a simple reason. Here's what it is.
The image is from the same source.
The cost of living adjustment is increasing your check.
The cost of living adjustment will cause your Social Security check to be bigger. The table below shows what the adjustment has been in the last few years and what it will be next year.
The year has ended.
The cost of living is adjusted.
The year 2022.
5.9%
The year 2021.
1.6%
2020
1.6%
The year 2019.
3.0%
This year
2%
The year 2017:
.
The table is from the Social Security Administration.
The COLA this year will be much bigger than it has been in the past. Your monthly payment will be larger once your first check arrives in January 2022, which hasn't been the case in the past.
Cost of Living Adjustments are caused by inflation. Prices go up over time. Benefits must go up to make sure seniors don't see their spending power decline dramatically during their retirement. A formula is used to calculate the cost of living.
The Bureau of Labor Statistics created a price index for the Social Security Administration. It's called the Consumer Price Index for Urban Wage Earners and Clerical Workers. Food and beverages, housing, clothing, transportation costs, medical care, recreation, education, and a variety of other goods and services are included in the spending categories.
The third quarter of the year is considered by the Social Security Administration. The average of the readings from those three months is calculated by the Administration.
The data shows how prices have gone up over the course of a year. There will be no cost of living increase if prices stay the same or go down. If costs go up, seniors will get a raise based on the percentage increase in costs from one year to the next.
Retirees will see a 5.9% increase in their benefit starting with their first payment in 2022, after the critical three months of the data show a 5.9% increase compared with the 2020 data.
How to calculate what your new monthly payment will look like
If you know you're getting a 5.9% COLA, you can calculate how much bigger your checks will be by taking your current benefit and dividing it by 5.9%.
That's not the end of it. Most retirees take Medicare Part B premiums out of their payment. Next year, those will go up to $170.10 from $148.50. If you add 5.9% to your current benefit amount, you'll have to subtract $21.60 from it.
When you get your Social Security checks in 2022, the amount should be what you see. The reason your benefit check looks different from the last one you received is because of the COLA and Medicare increase.
