Social Security and Medicare are key parts of all people’s retirement plans. Thus, it is very important to keep up with all the changes and potential changes that are occurring in these two entitlement programs. And as almost everyone knows, there is a lot of change happening to these plans, and these changes will have effects on your retirement plan.
Let’s start with some good news. The Social Security cost of living increase, called COLA, is getting its largest increase in 40 years. For 2022, that increase is 5.9%. This will be applied to monthly retirement checks and supplemental security income checks. So the good news is Social Security checks are increasing by the most they have in decades.
Unfortunately, though, this is not all good news, for a couple of reasons. First, the cost-of-living adjustment is based on changes to a consumer price index called CPI-W, and it is showing a dramatic increase in prices. And, this inflation is expected to continue into next year, which will have major consequences because costs are rising dramatically on purchases retirees make frequently, including food, housing, and electricity. And while the COLA should theoretically ensure seniors don’t lose buying power despite some of the highest inflation in decades, past research has shown these adjustments aren’t very good at that. Over the past two decades, retirement benefits have actually lost about 30% of their buying power.
The other reason the COLA increase is not all good news is that most retirees will not see all that increase because there has also been a large Medicare Part B premium increase this year. The standard monthly premium for Medicare Part B is going up from $148.50 to $170.10 in 2022, which is a $21.60 monthly increase, marking the program’s largest annual jump dollar-wise. And since most retirees pay Medicare Part B premiums directly out of their Social Security checks, the cost of living adjustment is then reduced.
So those are the changes set in stone for 2022. However, there are also some anticipated changes coming to help save these programs for the future. To learn more about this and get your retirement plan updated based on all the changes occurring, visit the Prepare Institute website (www.theprepareinstitute.org) and find a retirement course or class near you.
Content is for educational and informational purposes only. It is not intended to be used as the sole basis for financial decisions, nor should it be construed as advice designed to meet the particular needs of an individual’s situation. You should contact your retirement and tax professional before utilizing any of the information in this article.