Who gets the COLA checks 2022?

The Cost of Living Adjustment (COLA) checks in 2022 aim to provide financial relief to Americans facing higher costs due to inflation. The COLA checks for 2022 will go out to over 64 million Social Security recipients, federal retirees, and recipients of Supplemental Security Income (SSI). With inflation reaching a 40-year high in 2022, the COLA increase for 2022 checks is 5.9%, the highest in 40 years. This means the average recipient will get about $92 more per month in benefits. Here’s a quick overview of who qualifies for the 2022 COLA checks:

  • Retired workers – Anyone receiving Social Security retirement benefits
  • Disabled workers – Those getting Social Security disability benefits
  • Federal retirees – Retirees who are getting benefits from the Civil Service Retirement System or Federal Employees Retirement System
  • SSI recipients – People receiving Supplemental Security Income benefits
  • Spouses/dependents – Spouses and dependents of someone getting Social Security or SSI benefits
  • Surviving spouses/dependents – Surviving spouses and dependents of deceased workers eligible for benefits

Social Security Recipients

Around 70 million Americans receive some kind of benefits from the Social Security Administration. This includes retired workers as well as their spouses and dependents who qualify for benefits. Disabled workers who receive SSDI (Social Security Disability Insurance) benefits also qualify for the COLA increase. Even low-income seniors and people with disabilities who get SSI benefits will receive a COLA raise. Across all categories, the average COLA increase is expected to be about $140 per month for the average recipient.

Retired Workers

Anyone receiving Social Security retirement benefits will automatically get the 5.9% COLA increase added to their monthly payments starting from December 2021. To be eligible for Social Security as a retired worker, you need to have earned enough work credits during your employment years. The full retirement age is 66 for those born between 1943 and 1954. It rises by 2 months every year for those born between 1955 and 1960. Anyone born in 1960 or later has a full retirement age of 67. Early retirement with reduced benefits is available from age 62.

Disabled Workers

Those receiving Social Security Disability Insurance (SSDI) benefits will also get the COLA raise. To qualify for SSDI, you must have worked enough years and met Social Security requirements for disability status. Disability under SSDI is defined as a physical or mental condition severe enough to prevent substantial gainful activity for at least a year. Disabled workers can claim SSDI benefits before their full retirement age based on their disability status.

Spouses and Dependents

Spouses and dependents of retired or disabled workers may be able to claim benefits based on the worker’s eligibility. Widowed spouses can claim survivor benefits from age 60 (or at 50 if disabled). Divorced spouses may also claim benefits if married for over 10 years. Dependent children under age 18 can receive up to half of the parent’s full retirement benefit amount. Disabled dependent children may receive benefits beyond age 18 in some cases. Any spouses or dependents receiving benefits based on a worker’s eligibility will also get the COLA raise added to their monthly payments.

Federal Retirees

There are around 2.7 million federal retirees receiving either Civil Service Retirement System (CSRS) benefits or Federal Employee Retirement System (FERS) benefits. Both groups will have their monthly payments increased by 5.9% starting from January 2022. The COLA change should first appear in the January 2022 annuity payments made at the beginning of the month. Most federal retirees under FERS will also get a COLA raise to their Social Security benefits paid separately.

CSRS Retirees

The CSRS covers federal workers hired before 1984. This defined-benefit pension plan pays a lifetime monthly annuity at retirement based on your length of service and salary. CSRS annuities are adjusted each year based on the increase in the CPI-W index, which is the COLA raise. CSRS retirees will see bump of about $148 per month on average in their January 2022 benefit payments.

FERS Retirees

The FERS covers federal workers hired in 1984 or later. This three-part system includes Social Security benefits, a defined benefit pension, and the TSP. FERS retirees will get the 5.9% COLA raise both for their FERS pension as well as to their Social Security benefit. For FERS retirees, the average monthly raise will be around $146 across both components.

SSI Recipients

Around 8 million Americans depend on Supplemental Security Income (SSI) for support. SSI provides monthly payments to people in financial need who are either elderly aged 65 or older, blind, or disabled. Both children and adults can qualify for SSI benefits. The maximum monthly SSI payment for 2022 is $841 for an individual or $1,261 for couples. With the COLA increase, the average monthly SSI payment will rise by $44 per month for individuals and $66 for couples.

Eligibility for SSI

To receive SSI benefits, you must have limited income and assets. Income limits for SSI eligibility are currently $783 per month for individuals and $1,175 for couples. Asset limits are $2,000 for individuals and $3,000 for couples. Not all income or assets count towards these limits, but they determine initial eligibility. Even if you already get Social Security or SSDI, you may qualify for additional SSI benefits if you meet the low-income requirements.

SSI Child Recipients

Around 1.1 million children under age 18 get SSI benefits either due to disability or blindness. Qualifying children may receive up to 50 percent of the SSI amount for singles based on parental income and assets. With the COLA increase, the maximum SSI payment for eligible children rises to $421 per month for 2022. Exact payment amounts are determined on a case-by-case basis depending on the child’s condition and the parents’ means.

How the COLA Amount is Calculated

The COLA amount is determined annually based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures monthly price changes for a basket of common goods and services like food, housing, apparel, transportation, medical care, recreation etc. The COLA for 2022 is calculated by comparing the average CPI-W reading for the third quarter (July to September) of the current calendar year 2021 to the third quarter average for the prior year.

COLA of 5.9% for 2022

The average CPI-W reading for third quarter 2021 was 274.224. The comparable figure for third quarter 2020 was 258.811. The 2022 COLA amount is based on the percentage increase between these two numbers. For 2022, the COLA increase is 5.9%, which is the highest in four decades. It represents the percentage raise needed to match the increase in prices as measured by the CPI-W.

Bigger COLA required due to high inflation

Inflation started rising sharply in early 2021 as the economy reopened. Supply chain bottlenecks, high oil and gas prices, labor shortages, pent-up consumer demand, and other factors have contributed to surging inflation. Prices have risen substantially across the board including essentials like food, rent, electricity, health care, cars, and gas. A bigger COLA raise was required to help Social Security and SSI recipients maintain their purchasing power against this high inflation.

Impact of Bigger COLA Checks

The significantly higher COLA adjustment for 2022 will help beneficiaries deal with rising prices to some degree. Here is an overview of the expected benefits as well as potential side effects of the bigger payments.

Buying power partially restored

The main purpose of COLA raises is to prevent inflation from eroding the purchasing power of Social Security and SSI benefits. The nearly 6% increase in 2022 will provide some relief after prices rose more than 5% in the past year. It can help seniors afford higher costs for essential medical care, utilities, food and other basics. However, prices are expected to keep rising in 2022 so the COLA may not fully cover higher costs.

Higher income taxes for some

The flip side of bigger monthly checks is higher taxes for certain beneficiaries. About 50% of seniors have to pay federal income taxes on part of their Social Security benefits based on income thresholds. With the COLA hike, around 800,000 more beneficiaries are expected to cross the income thresholds that trigger taxes on benefits. State taxes may also kick in for additional retirees.

Potential changes to Medicare premiums

Medicare Part B premiums are deducted directly from monthly Social Security checks for most seniors. While 2022 premium changes are still being finalized, early estimates suggest a significant rise from around $148 to $160 per month. If so, the COLA raise would be partially offset by higher Medicare costs. However, a provision limits Part B increases for most retirees.

Higher SSD/SSI payments change eligibility

For recipients of Social Security Disability and Supplemental Security Income, higher payments can reduce other benefits. That’s because federal programs like SNAP and Medicaid have income cutoffs for eligibility. Even a small Social Security raise can potentially bump someone above the income limit and lose access to other benefits. The SSA does offer ways to shelter COLA increases to prevent this.

Administrative challenges for SSA

Implementing the sizable COLA increase for 2022 poses some administrative challenges for the Social Security Administration. They will need to recalculate benefit amounts and update records for over 70 million Americans receiving benefits. The task is complicated by SSA’s very limited administrative budget. Most of the work must be done manually on old IT systems. There are concerns this could lead to delays in getting the new COLA amounts processed and paid on time.

Key Takeaways

  • The COLA increase for 2022 is 5.9%, the highest rise in four decades due to inflation.
  • All Social Security recipients will see their monthly benefits go up in 2022. Higher payments start in December 2021 for retired workers and January 2022 for SSI and federal retirees.
  • Besides retirees, the COLA raise also applies to disability beneficiaries, dependents, and survivors across Social Security and SSI.
  • Federal retirees under CSRS and FERS will get a COLA raise in their January 2022 annuity payments.
  • The average monthly increase across Social Security and SSI is estimated around $140 per recipient.
  • The COLA aims to help offset higher inflation but may not fully cover rising prices in 2022.

Frequently Asked Questions

When will I get the COLA raise?

The COLA goes into effect with December 2021 Social Security payments, January 2022 SSI/VA payments, and January 2022 CSRS/FERS annuity payments. You should see the increase in your first check of 2022 at the latest.

Are COLA raises automatic?

Yes, the COLA increases are automatically calculated based on inflation and applied to benefits. You do not need to apply or file anything to receive the raise.

Can my benefits go down with COLA?

No, your benefit amount will never decrease due to COLA. COLA raises benefits to match inflation but will not lower payments if inflation falls.

Do federal retirees receive COLA?

Yes, both CSRS and FERS annuities are adjusted upward each year based on the official COLA rate. The 2022 COLA applies to civil service retirees and military/uniformed service retirees.

Do SSI benefits go up each year?

Yes, SSI recipients receive an annual COLA raise generally on par with the increase to Social Security benefits. The monthly SSI amounts are adjusted upward each year for inflation.

Does the COLA actually match inflation?

Not fully. The COLA may underestimate inflation faced by seniors and people with disabilities. Prices for housing, medical care and essential services tend to rise faster than the broader goods/services used to calculate COLA.

Conclusion

The unprecedented COLA increase for 2022 will provide urgent support to around 70 million Americans facing the highest inflation in decades. All Social Security beneficiaries as well as SSI recipients will see bigger checks starting at the end of 2021. Along with federal retirees covered under CSRS and FERS, the COLA provides broad inflation relief to workers, disabled individuals, dependents, and survivors. However, rapidly rising costs may still outpace the the largest COLA hike in four decades. Going forward, policymakers may need to consider more targeted support to help the groups most vulnerable to inflation.

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