In 2022, the Social Security program could be seeing its largest cost of living adjustment (COLA) in decades, with beneficiaries potentially receiving an additional 6.2% to their benefit payout according to estimates by the nonpartisan Senior Citizens League. This is according to a story published by finance news site The Motley Fool.
“We won’t know what next year’s Social Security COLA will look like until we get complete third quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). And that won’t happen until October,” the story reads. “But based on how the index rose in July, the [League] is now estimating 2022’s COLA to come in at 6.2%. If that happens, it will be the largest raise seniors will have seen in years.”
One of the reasons that this raise could end up being so high is because of a recent spike in inflation, which means that the literal cost of living is higher for everyone when it comes to general goods and services that people consume. Medicare premiums are also likely to increase in 2022, but it will not be clear by how much until later in the year.
Even with a more substantial COLA, however, it may not be the most advantageous thing to rely upon for money in retirement, the column says.
“Many seniors today have no choice but to hope each year that their COLA will be generous. But if you’re not yet retired, rather than depend too heavily on those COLAs, you should instead make an effort to secure a sizable income stream outside of Social Security,” the story reads. “The fact that seniors may be in line for a substantial COLA is news many are apt to celebrate. But generous COLAs are always a mixed bag, and depending on Medicare hikes, they can also be a letdown.”
This is why looking for alternative sources of cash in later years is always a good idea, especially for those who have time to prepare prior to retirement, the story says.
Most reverse mortgage originators seem to agree that the COLA makes for a welcome adjustment to their clients’ pocket books, but may not have an abundance of effect in terms of their continuing need for the product, according to previous outreach conducted by RMD. Since Social Security can oftentimes be the only source of income for a segment of seniors, there are some concerns that borrowers could have to face beyond just incorporating the COLA into their benefits.
Read the story at the Motley Fool.