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Social Security Inflation Adjustments for 2022

| October 25, 2021

It is no secret that inflation has been elevated in 2021. Supply chain constraints along with labor shortages have pushed up prices on a variety of goods and services as the combination of supply scarcity and high demand caused many consumers to bid up prices. These increases in prices can be especially difficult for retirees who are on a fixed income and unable to renegotiate their current compensation as workers may do. Fortunately, some retirement benefits, such as Social Security, come with a COLA, or Cost-of-Living-Adjustment, which increase as inflation heats up.

The Social Security Administration recently announced that the Social Security COLA for 2022 will be 5.9%.   This is the highest increase in Social Security benefits in four decades going all the way back to 1982. The increase will likely be a big relief to retirees who are struggling to keep up with rising prices on many necessary household items.

However, high income workers may find that the inflation adjustments will cause them to pay more in Social Security taxes in 2022. The Social Security wage base, the amount of wages subject to Social Security taxes, will increase from $142,800 in 2021 to $147,000 in 2022.  

The bad news for many retirees is that their Medicare premiums are expected to increase by $10 per month, or 7% in 2022. So, some of the increase in Social Security benefits will go to paying for the increased cost of health insurance.