For retirees or anyone passionate about Social Security, the topic of annual COLAs is important.
While seniors usually see a Social Security COLA every year, 2020 and 2021 brought challenges that pushed many people to their financial limits.
Even those who are doing well are feeling the sting of lingering pandemic shutdowns and ongoing supply chain struggles. Add in severe inflation exacerbating decades of poor budgeting for government programs like Social Security, and it’s a bit of a miracle the COLA turned out as high as it did.
While this COLA makes a good start, it should be viewed as the start of an ongoing tradition where each raise outdoes the one before it and stays on pace with inflation. But had things gone a little differently, this COLA may not have been nearly as noteworthy.
What Changes Had a Big Impact on the 2022 Social Security COLA?
While COLAs are determined based on a number of factors including the overall state of the economy and petitions from groups like NORA, there’s also the fact that certain financial indexes are used as measuring tools for raises.
While the CPI-E is the one many believe should be used to determine COLAs since it is based around costs seniors deal with more of, CPI-W was actually used – the one for wage earners and clerical workers.
However, CPI-E prices actually rose slower than CPI-W prices due to healthcare cost inflation slowing compared to costs like transportation. This means the “incorrect” metric actually helped seniors turn what would’ve been a 4.8 percent increase into a 5.9 percent increase.
It’s a fine start, and it’s something that NORA thanks its readers for making happen. But we have to keep on pushing the cause to make sure record COLAs become a regular occurrence. Follow us on Twitter and Facebook to learn more about our efforts