Industry News

On August 17, 2021, the Center for Retirement Research at Boston College (CRR) issued its brief, The Impact of Inflation on Social Security Benefits. The brief cites that the U.S. Social Security Administration is expected to announce that benefits will be increased for a cost-of-living adjustment (COLA) of about 6% beginning in January 1, 2022.

The antici­pated COLA increase for 2022 would mark the largest COLA in 40 years and highlights the impor­tance of the automatic indexing provision.

However, some of the inflation protection offered by Social Security’s COLA may be affected due to: 1) Medicare Part B premiums that may increase faster than the COLA deducted automatically from Social Security benefits; and 2) a rising portion of benefits that are subject to personal income tax. As a result, these factors may reduce the net benefit that retirees get to cover shelter, food and clothing.

According to CRR, “while the inflation adjustment in Social Security is ex­tremely valuable, the rise in Medicare premiums and the extension of taxation under the personal income tax limits the ability of beneficiaries to fully maintain their purchasing power.”

The brief is available here.