An uncertain COLA outlook

Inflation is running hot, but the third quarter CPI-W will determine the Social Security COLA. Meanwhile, the Medicare Part B premium is a wild card that will impact the net COLA.

Retirees listen carefully every fall for two important numbers that impact their pocketbooks for the year ahead: the Social Security cost-of-living adjustment (COLA) and the standard premium for Medicare Part B.

Right now, the outlook for both of those figures in 2022 looks highly uncertain.

The recent surge in inflation has some forecasters predicting a very hefty COLA next year. But the final number will be decided by monthly data during the third quarter for the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W.

We will know the Social Security COLA in mid-October, but the 2022 standard premium for Medicare Part B will be equally important this year. That figure generally is announced sometime later in the fall.

If you're enrolled in both Social Security and Medicare, you don't know your net COLA until both numbers are unveiled, since the Part B premium is deducted from your Social Security benefit. Typically, some portion of the COLA is gobbled up by higher Part B premium costs--sometimes, quite a bit of it, since healthcare prices usually rise at a much higher rate than general inflation.

This year, several unique factors make it nearly impossible to predict the size of the Part B premium hike--and it could be a big one.

Learn more in my latest columns for Morningstar and Reuters.

What I’m reading

Fired and defiant, former Social Security chief is cut off from agency computers . . . They didn’t expect to retire early, but the pandemic changed their plans . . . With workers in short supply, seniors wait months for home health care . . . New tools for helping aging parents . . . Why I kept my cancer a secret, and why I won’t anymore.