Social Security tends to undergo changes from year to year. One big change seniors can expect in 2022 is a boost to their monthly benefits.
Social Security cost-of-living adjustments, or COLAs, are based on third quarter data from the Consumer Price Index. This past quarter, inflation was rampant, and so as a result, seniors are getting a 5.9% COLA going into 2022. That's the largest raise that's been given to them in decades.
The Social Security Administration estimates that once next year's COLA takes effect, the average monthly benefit will rise from $1,565 to $1,657. For the typical senior, that's a $92 boost.
But don't start counting that extra money just yet. Despite that estimate, the raise you get in your Social Security benefits next year could end up coming in at a much lower number. Here are two reasons why.
1. Your monthly benefit is less than the average senior's
Social Security gives out a uniform COLA to all seniors, so no matter what your benefit looks like, you're entitled to that 5.9% boost in the coming year. But if your benefit is lower than the average, then you won't see your paycheck from Social Security go up by $92.
Imagine you collect $1,250 a month in benefits now. In that case, after applying a 5.9% COLA, you'd be looking at a raise of about $74 a month, not $92.
Of course, the opposite holds true if your monthly benefit is higher than the average senior's. In that case, you might see a more sizable raise.
2. You're enrolled in Medicare
Not everyone who collects Social Security is a Medicare enrollee. Medicare eligibility begins at age 65, whereas you can file for Social Security as early as age 62. Plus, you can collect Social Security even if you're still working. And if you're still working, you may still have access to a group health plan that makes enrolling in Medicare unnecessary.
Still, many seniors on Social Security are Medicare enrollees and therefore have their Part B premiums deducted from their monthly benefits. Next year, Medicare Part B costs are rising substantially. The standard monthly premium is set to increase from $148.50 to $170.10. That's a jump of $21.60. And that's also a figure you'll need to subject from your upcoming COLA.
So, let's say you collect the average monthly benefit of $1,565. After applying a 5.9% COLA, your benefit rises by $92. But when we subtract $21.60, you're left with a $70.40 raise instead.
Now to be clear, a $70.40 bump is still pretty significant in the context of Social Security. But unfortunately, much of that remaining money could easily get eaten up by higher food and fuel costs, which consumers of all ages are grappling with now.
Know what to expect
It's easy to read that Social Security benefits are going up a lot and get excited about that fact. But actually, you may, unfortunately, end up disappointed with the amount of extra money you get in benefits next year. The key, either way, is to know what monthly benefit to plan for so you can budget accordingly and make every dollar of Social Security income count.
Editor's note: This article has been updated to correct a math error. A boost from $148.50 to $170.10 is $21.60.