Social Security recipients have complained about stingy cost-of-living adjustments for years.
There was an announcement last October that seniors would receive a 5.9% COLA for 2022, the largest increase in decades.
There is no doubt that many seniors breathed a sigh of relief after hearing that news.
Despite a Big Raise, Inflation Cannot Be Stopped
The Consumer Price Index, a measure of fluctuations in the cost of consumer goods, is used to determine Social Security raises in the third quarter.
Data collected between July and September of 2021 formed the basis of this year’s 5.9% COLA.
However, inflation has continued to rise since then.
As of December, consumer prices rose by 7% annually, the highest increase since 1982.
Therefore, since the Social Security raise is not keeping pace with inflation, even though January is only a few months old, seniors on Social Security are already at a disadvantage.
The Motley Fool reports many seniors will not get those 5.9% raises in full. After all, their Medicare Part B premiums will be taken from their checks because they are enrolled in Medicare Part B.
The rate of Medicare Part B premiums increased a lot this year, so the COLA for seniors will be affected as it has in the past.
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Personal Savings are Very Important now Than Ever
Seniors who are dependent on Social Security are likely to face financial difficulties despite increased benefits.
Future retirees must be aware of the limited purchasing power of Social Security.
Social Security generally replaces about 40 percent of the preretirement earnings of a typical or average worker.
To maintain a reasonable standard of living and keep up with rising living costs, most seniors require roughly twice that level of income.
This is why it is so important to save for retirement independently, whether that is through an IRA, a 401(k), or another long-term savings account.
The difference between a comfortable retirement and struggling to make ends meet can be made by building a nest egg.
It doesn’t matter how high inflation rates are, Social Security still does a poor job of maintaining the purchasing power of seniors.
Having income outside of these benefits is a great way to compensate.
The length of rampant inflation is still unclear.
To add, consumer goods prices may not have even peaked yet, according to some experts.
Even though Social Security beneficiaries have the largest raise in decades, if prices don’t start dropping in the near term, 2022 could prove challenging for them.
