Social Security recipients are about to receive one of their biggest benefit hikes in decades.
Nearly every year, the Social Security Administration implements a cost-of-living adjustment (COLA) to factor recent inflation into the size of beneficiaries' monthly checks, giving them a shot at keeping up with rising costs. It's one of the biggest perks of the Social Security program.
Next year, retirees and other beneficiaries will see their monthly payments increase by a whopping 5.9% -- the biggest hike in roughly 40 years. For comparison, 2021's COLA was just 1.3%, and they have generally landed between 1% and 3% in any given year.
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How will your benefits compare to the average?
To find out just how much your benefits will increase, check your mySocialSecurity online account. That will show how much you're currently receiving (or your estimated benefit amount if you haven't claimed yet), as well as how the 2022 COLA will affect your future checks.
After the COLA takes effect in January, the average retiree will receive around $1,657 per month -- $92 more than the 2021 average benefit amount.
Married couples who are both entitled to retirement benefits will receive around $2,753 per month, on average, and disabled workers will collect an average of $1,358 per month.
While this significant increase in benefits may seem like something to celebrate, it's not all good news for retirees.
Why the 2022 COLA isn't as great as it seems
Next year's COLA will result in retirees receiving more from Social Security. However, that doesn't necessarily mean they'll feel like they have more money to spend.
Each year's COLA is a reflection of the inflation that occurred in the prior year. A bigger benefit boost only means that inflation has also increased more substantially, making the necessities of life more expensive. And while COLAs are intended to prevent benefits from losing buying power, by and large, they haven't quite achieved that.
In fact, according to a report from the Senior Citizens League, Social Security benefit checks have lost 30% of their buying power since 2000 because the annual cost-of-living adjustments haven't kept up with inflation as it has affected seniors' real expenses.
In addition, Medicare premiums are also increasing due to inflation. Medicare Part B premiums are expected to rise by around 6% in 2022, according to data from the Congressional Research Service. Also, a report from the Center for Retirement Research found that over time, Medicare premiums tend to increase faster than the COLA.
What does this mean for you?
Next year's COLA will be historic, and you should notice the significantly larger checks once the adjustment takes effect. However, that benefit bump might not have as much of an impact on your finances as you would hope.
