Earlier this year, seniors on Social Security got some good news. Come 2022, benefits will be going up by 5.9%, representing the largest increase in decades.

Why such a big jump? It boils down to a big uptick in the Consumer Price Index (CPI), which measures fluctuations in the cost of consumer goods.

Social Security raises (known as cost-of-living adjustments, or COLAs) are based on third-quarter CPI data. Some years, the CPI's reading is such that seniors get a very small COLA or none at all. But because inflation has been so rampant, seniors will finally get a notable boost to their benefits in the new year.

Social Security cards.

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A 5.9% COLA may seem like a generous raise at first. But it may not actually help seniors maintain their buying power in the face of inflation.

Seniors are already falling behind

A 5.9% raise could make it easier for seniors to cover their living costs in the new year. But based on the way inflation has soared since that COLA was announced, it's clear that seniors are already at a disadvantage.

In November, the CPI recorded a 6.8% increase in the cost of consumer goods over the previous year. That puts seniors' 5.9% COLA in a whole new context.

Worse yet, we don't know what inflation has in store for consumers in the coming months. And if it climbs even further, seniors could be left scrambling to pay their bills.

Compounding the issue is the fact that seniors on Medicare won't even see their 2022 COLA in full. Next year, the standard Medicare Part B premium is rising from $148.50 to $170.10. That's a $29.60 increase.

Meanwhile, the average senior on Social Security will see his or her monthly benefit rise by $92 based on that 5.9% COLA. But when we subtract $29.60, it knocks that raise down to $62.40. And while that's still almost an extra $750 in leftover income on an annual basis, it may not be enough to help seniors stay afloat, given the recent uptick in basic living costs.

All of this highlights the danger of retiring on Social Security without any supplementary income sources, like personal savings or a pension. And it should serve as a wakeup call for current workers to get serious about building a nest egg, since workplace pensions are growing increasingly obsolete.

Socking away even $200 a month in an IRA or 401(k) plan over a 35-year period will result in an ending balance of about $414,000, assuming that account is invested at an average annual 8% return. That return, however, is a few percentage points below the stock market's average and is a reasonable one to work with over a decades-long savings window.

Making the most of next year's COLA

Seniors who are reliant mostly on Social Security to pay their bills will need to do their best to stretch next-year's COLA as far as possible. But some beneficiaries may need to make hard choices in the absence of outside income -- even at a time when they're pocketing their largest raise in years.