Americans who receive Social Security benefits will see the largest increase in their payments in 40 years, according to the Social Security Administration.
According to the Social Security Administration (SSA), next year’s cost-of-living adjustment (COLA) will be 5.9%, translating to an additional $92 for average monthly benefits and a total payment of $1,657 each month.
The 5.9% COLA is the largest increase since 1982, when the adjusted cost-of-living reached 7.4%, according to the SSA. The adjustment is calculated based on the Bureau of Labor Statistics’ (BLS) monthly inflation report.
The SSA also announced that the maximum earnings subject to the Social Security tax will increase to $147,000 in 2022, a 2.9% increase from 2021’s $142,800 maximum earnings subject to the tax.
The direction of inflation will ultimately determine the extent to which the COLA will impact recipients, Naomi Fink, a retirement economist at Capital Group, told The Wall Street Journal.
“If price rises turn out to be fleeting and reflect temporary supply shock and they subsequently show much more modest rises in 2022, then that would be quite positive for those that got that windfall cost-of-living adjustment,” Fink told the WSJ. “If in 2022 we see equal or even greater price rises and revisions to long-range inflation forecasts, it’s a different picture.”
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