These 2 Major Reasons Why Social Security’s Large Increase in 2022 Will Be Detrimental to Retirees.

By Jessa Martin On Dec 25, 2021

In 2022, Social Security seniors will receive the largest increase in more than two decades. Isn’t that encouraging news? Unfortunately, the 5.9 percent cost-of-living adjustment (COLA) that seniors will receive next year is very negative news for them, and this is due to two major factors.

Here’s why seniors shouldn’t get too giddy about the increase in benefits they’ll receive in the upcoming fiscal year.

The reasons for the COLA are as follows:

The fact that Social Security’s substantial boost is actually negative news is due to the fact that the raise is so great solely due to the fact that inflation is so high.

Inflation is defined as an increase in the price of goods and services over a period of time. Unless income increases in tandem with inflation, it results in a fall in purchasing power.

Social Security cost-of-living adjustments (COLAs) are intended to assist retirees in keeping their pay in line with inflation because they do not receive wage increases like current employees.

Annual cost-of-living adjustments (COLAs) are determined on the basis of price increases over the previous year as indicated by a specific price index known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

Because the CPI-W revealed that prices for goods and services increased significantly in 2022 when compared to 2021, retirees will get a significant raise in their Social Security income.

However, for the majority of seniors, Social Security does not provide their sole source of income. The majority of the elderly must also rely on their savings.

Inflation, on the other hand, is really terrible news for savers because it means that the purchasing power of their savings decreases.

When it comes to investing, most seniors stick to safe bets since they can’t afford to take significant changes in the market when they’re dependent on the income from their investments to supplement their income.

As a result, they do not achieve the same high returns as younger investors who have greater exposure to the stock market. When inflation is extremely high, it further diminishes the value of their effective returns.

Furthermore, it is possible that they will be forced to withdraw more money from their accounts in order to maintain their quality of living, increasing the likelihood that they would run out of money later in life.

Unfortunately, this means that the very factors that led to a significant Social Security increase could leave seniors with a difficult choice between experiencing a decline in their current quality of life because their retirement account distributions don’t buy as much as they used to, or risk running out of money later in life.

The amount of COLA that will be paid

While the news is distressing in and of itself, there is another issue to consider.

The Social Security COLA is intended to keep the purchasing power of Social Security benefits stable, however, it has failed to achieve this goal.

Prices of essential commodities purchased by seniors have risen at a greater rate than Social Security payouts for decades. Benefits have also lost a third of their purchasing power since 2000 as a result of this decline.

Since some recent measures indicate that inflation has resulted in a price increase of more than 5.9 percent when compared to last year, the COLA is likely to fall short of expectations once more. This means that Social Security benefits will not be as generous as they were in 2021, despite the significant increase.

Seniors may be forced to make difficult decisions in 2022 if present inflation levels continue to have a negative impact on both of their key sources of income.

Retirement income may not be jeopardized by long-term financial consequences if retirees plan carefully and take advantage of available resources such as credit card rewards and senior discounts.

However, retirees must be aware that the Social Security increase is not a good thing, rather than a promising piece of news, and must act accordingly.

Most seniors are fully unaware of the $16,728 Social Security bonus they are entitled to.

When it comes to retirement savings, if you’re like the majority of Americans, you’re a few years (or more) behind. However, a few little-known “Social Security secrets” may be able to assist you in ensuring a raise in your retirement income.

For example, one simple strategy might result in you earning as much as $16,728 more every year… if you do it consistently! We believe that if you understand how to optimize your Social Security benefits, you will be able to retire securely and with the peace of mind that we all seek.