The annual cost-of-living adjustment, or COLA, for Social Security benefits in 2022 — typically announced in October — could be 4.7%, the highest since 2009, based on Wednesday's Consumer Price Index announcement, according to Social Security and Medicare policy analyst Mary Johnson of The Senior Citizens League.
The Social Security Act ties the annual COLA to the Consumer Price Index for Urban Wage Earners and Clerical Workers, known as CPI-W. This inflation measure rose 4.7% from 12 months ago and 0.9% in April, the Bureau of Labor Statistics announced Wednesday.
The Consumer Price Index for All Urban Consumers, or CPI-U, rose 0.8% from the prior month and 4.2% over the last 12 months, with gains reflected "in nearly every category and a sign of burgeoning demand" giving companies the ability to pass on higher costs, according to Bloomberg News.
The Senior Citizens League's COLA estimate is based on CPI data through April, but the actual COLA "will be based on the percentage of difference between the third-quarter average of the increase in the CPI-W from the previous year to the current year," Johnson told ThinkAdvisor in an email.
"This is a highly unusual inflation jump," she said. "When January 2021 data was released, I estimated that the 2022 COLA would be only 1.5%. The fact that today's estimate is 4.7% reflects an increase in inflation over just 90 days. A 4.7% COLA would be the highest since 2009 when the COLA was 5.8%. With several more months of data left to go, this estimate could change several times."
