Social Security Cost of Living Increase (COLA) for 2022: Is It Fair for Seniors?

According to several news outlets, the cost of living increase (COLA) for social security recipients for 2022 could be the largest increase in nearly 40 years. The estimated number at this point is an increase of 6.1%, up from an earlier number of 5.3%. That's the good news. Now the bad news - this huge increase is the result of escalating inflation, which is expected to continue due to government spending policies and the pandemic. And, the COLA is subject to change with three more months of numbers to report before the final amount is announced.

Attorney RJ Connelly III

"I know that discussing money and financial matters in a blog is not the most eye-catching or interesting thing to read about," says Certified Elder Law Attorney RJ Connelly III, "but it is a subject that more Americans, especially our seniors, need to be aware of especially since it appears we are heading into an inflationary period and their standards of living could be significantly affected."

For those who collect Social Security and have no other supplemental income, a 6% may seem like a lot until we realize that the average SSA benefit in 2021 is just $1,543 per month. Meaning that this increase will result in an additional $95 a month, not much when we consider the rapid price rises that are occurring.

For individuals who are collecting Supplemental Security Insurance (SSI), the average payment is $586 for adults and $695 per month for children. The maximum SSI payment is $794 per month in 2021 with an additional supplement added in some states. So for those adults getting the maximum payment, a 6% increase would amount to $48 monthly.

"Even with this increase, seniors are still falling behind with their Social Security benefits when it comes to living on this income in 2022 and the inflation that is occurring," stated Connelly. "For instance, Medicare and the new drug coverage co-pays and deductibles take, on average, nearly a quarter of an average social security check - and then we have the price increases of everyday living costs that were relatively stable and predictable."

Fuel prices continue to rise

Those increases Connelly is referring to include food and energy costs. "We certainly know that all prices are increasing, but none faster than energy. Last week, the average price of gasoline was around $3.17 a gallon, that's up nearly a dollar from the same time last year. There are also concerns that home heating oil prices are also going to spike tremendously this year, so if we have a colder than normal winter here in the Northeast, the budgets our seniors live on are going to be stretched to the limit. With higher oil prices, other costs like electricity will also rise, costs of delivering food to supermarkets increase, and on and on. So this expected increase of 6% may not be enough to keep pace with the inflation."

So why hasn't the average social security check kept pace with the economy? According to Connelly, it's because the numbers are computed using an antiquated system.

"The methodology used by the feds in calculating the increases was developed over 40 years ago, which assumed that elderly adults needed only 92% of what middle-aged Americans required for basic living needs," said Connelly. "But things have changed since then and our seniors, for the most part, need as much as other Americans to maintain a household which is especially important now as seniors are choosing to age in place."

Determining COLA Increases

COLA increases are based upon the Consumer Price Index or CPI, which has increased due to higher food and energy prices that have pushed the inflation rate higher. "But here is where things get a little hinky when the media reports the Consumer Price Index as a singular entity," said Certified Elder Law Attorney RJ Connelly III. "Here in the United States, we have several consumer price indices that are computed by the Bureau of Labor Statistics (BLS), so explaining how this works is a bit more complicated than it initially appears."

Indeed it is. The different indices that Attorney Connelly spoke about are the following:

  • Consumer Price Index For All Urban Consumers (CPI-U) - this measures the changes in the price of a basket of goods (The basket of goods includes basic food and beverages such as cereal, milk, and coffee. It also includes housing costs, bedroom furniture, apparel, transportation expenses, medical care costs, recreational expenses, toys, and the cost of admissions to museums also qualify. Education and communication expenses are included in the basket's contents, and the government also includes other random items such as tobacco, haircuts, and funerals). The urban consumer population is deemed to be a better representative measure of the general public because most of the U.S. population, nearly nine out of ten, lives in highly populated areas.

  • The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) - this index is based on the expenditures of households included in the CPI-U definition that meet two requirements: more than one-half of the household's income must come from clerical or wage occupations, and at least one of the household's earners must have been employed for at least 37 weeks during the previous 12 months. The CPI-W population represents about 29 % of the total U.S. population and is a subset of the CPI-U population.

  • The Consumer Price Index for the Elderly (CPI-E) - The CPI-E uses the same formulas and prices as the CPI-W, but their importance is determined, or weighted, differently. The CPI-E uses expenditure weights for households with individuals age 62 or older. This sample size is about one-third the size used for the CPI-U, so is subject to a greater sampling error. This is one reason the CPI-E continues to be classified as “experimental”. We discuss this further below.

  • Chained Consumer Price Index For All Urban Consumers (C-CPI-U) ... Designated the C-CPI-U, the index supplements the existing indexes already produced by the BLS: the CPI for All Urban Consumers (CPI-U) and the CPI for Urban Wage Earners and Clerical Workers (CPI-W)


The CPI-E represents the best alternative for correcting problems with the CPI-W for America’s seniors. The current CPI-W does not account for the unique spending patterns of the elderly and is itself flawed because of changes in occupations and declining survey responses.

Healthcare costs continues to rise

"Current benefits being tied to the CPI-W just doesn't work for seniors," said Connelly. "They have different spending habits and different needs than younger people especially when it comes to healthcare. We need a more accurate way to measure this and calculate realistic COLAs for social security recipients so we can provide more financial security for this group."

In order to implement the CPI-E, the BLS will need to explore cost-efficient ways to evaluate the data currently used to produce indexes, obtain sufficient funding to evaluate current data, conduct the research and expand the sampling needed to enable the index to move from experimental to official policy.

Connelly stated, "we can’t pretend that the needs of older Americans are precisely the same as the needs of younger groups as a whole. Of course, there are variations within the group, but as a whole, older adults are at higher risk of being cornered into purchasing certain products that they simply cannot substitute to make up for rising costs. The 2021 COLA was woefully insufficient given the disproportionate impact that the COVID-19 pandemic had on older Americans. We need to find a way to make the system fairer, and using a targeted means of inflation indexing is one of the ways to do this."

"Indexing benefit COLAs to the CPI-E would reflect the true inflationary increases for seniors and others living on fixed incomes," continued Connelly. "To do this, we need to remember the increased health care spending among seniors who often bear the brunt of rising prescription drug costs and other medical care in this country."

But this may be changing thanks to a new bill that has been introduced in Congress.

Fair COLA for Seniors Act of 2021

The Fair COLA for Seniors Act of 2021, would change the way that Social Security is indexed to keep up with inflation to adopt a consumer price index for the elderly (CPI-E).

Those who support the plan say that using the CPI-E would be a more accurate way of calculating the COLAs for SSA recipients. "The CPI-E would use the same measures as the CPI-W, but would assign a greater weight to those products and services actually used by those of retirement age," said Connelly.

Protecting Social Security is imperative

This act was put forth by California Democrat Representative John Garamendi as a way to bring retirees up to par with the actual cost of living, citing that the CPI-E placed a higher rating upon healthcare costs, a major expense for seniors. Unfortunately, even if this bill passes, retirees may not see much of a difference as it may take over two decades for benefits to be significantly affected. "Even though it may not result in an immediate noticeable change," said Connelly, "it's a step in the right direction and the kind of change necessary if it's the beginning of a larger Social Security reform effort." And reform is needed.

Anyone who has paid even a passing glance to the news is aware of the ongoing warnings about the Social Security system running out of money by the mid-21st century. "The are a number of proposals on the table to make changes to the Social Security system to keep it viable for future generations," said Connelly. "It's not necessary to tear down Social Security in order to save it, but there must be changes in order to restore it to sustainability. Our seniors deserve it."

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