A historic Social Security COLA for 2022

The headline figure is 5.9%, but your own mileage will vary

A six percent raise doesn’t come along often these days for most Americans, but a bump of that magnitude in Social Security benefits is on the way for 2022.

Reflecting unusual pandemic-driven inflation this year, Social Security recipients will see a 5.9% cost-of-living adjustment (COLA) next year - the largest since 1982. The annual COLA - announced on Wednesday by the Social Security Administration - will go to more than 64 million recipients of Social Security, and 8 million who receive Supplemental Security Income.

COLAs also affect people who are eligible for Social Security but have not yet filed for benefits. So, if you are 62 now and wait to claim later, your benefit will be adjusted to reflect the 5.9% COLA for 2022, and any subsequent COLAs awarded before you claim.

The COLA is one of Social Security’s most valuable features because it holds benefits steady against the erosion of inflation over time. Experts often debate whether it accurately measures the inflation experienced by seniors, but the COLA makes Social Security an inflation-adjusted annuity - which would be very costly to buy in the commercial annuity market.

Learn more in my Reuters column. And for a more detailed discussion, listen to the panel discussion on the COLA announcement below, featuring Stephen Goss, chief actuary of the Social Security Administration.

I also took a look at broader issues of retirement planning and inflation for my latest WealthManagement.com column.

Social Security unveils new statement format

The annual Social Security statement has undergone an overhaul - and it’s for the better. The new format uses easier-to-understand language, more detailed depiction of your benefit at different claiming ages, information on Medicare penalties and more.

For most of us, accessing the benefit requires setting up an online account with the Social Security Administration, since the statements are only mailed out to a small segment of the public these days. A push is on to force Social Security to resume mailing the paper statement - as it is required to do so by law.

Learn more about the new statement here.

What I’m reading

Separating fact from fake among retirees: A job for Poynter Institute’s MediaWise for seniors . . . In aging Japan, under 75 is the new “pre-old” . . . Medicare drug-pricing debate pits savings against innovation . . . Most of $9.2 billion in questionable Medicare Advantage payments went to 20 insurers.