Social Security benefits are set to rise by 8.7% next year – the fourth-biggest increase since automatic inflation adjustments were introduced in 1975.
This cost-of-living adjustment, or COLA, will boost the average monthly checks retirees receive in January by $146 to $1,827, the Social Security Administration said Thursday. That builds on last year’s 5.9% COLA increase, which was the largest bump since 1982. Before then, COLA increased by an average of 1.7% annually from 2010 to 2020.
The government bases its COLA adjustment on average annual increases in the consumer price index for urban wage earners and clerical workers from July through September. That index largely reflects the broad index that the Labor Department releases each month. The index rose to 8.5% in September, the Labor Department announced Thursday.
Around half of Americans who are 65 or older live in households where Social Security benefits account for 50% of their income, according to multiple surveys conducted by the Census Bureau. One-quarter of them receive at least 90% of their income from Social Security. These Americans, which tend to be lower income and don’t have pensions, aren’t going to feel any different from the COLA increase, said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
“This is not going to be like a big game changer in any way,” she said. “We’re talking about maybe putting new tires on the car for winter or getting a new pair of glasses.” What’s more, the index used to determine COLA, doesn’t accurately capture the costs older people and other types of Social Security recipients face, Johnson told USA TODAY. For instance, seniors tend to spend much more of their incomes on medical care than urban wage earners.