Benefits are going up, but so are the Medicare premiums deducted from monthly checks

Reprint from AARP Written by John Waggoner, AARP, December 28, 2021

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Social Security beneficiaries will have a lot to cheer about in 2022 — but they may have a few things to grouse about as well. Here’s a rundown of what will change for Social Security beneficiaries in the new year.

Monthly benefits

The biggest change beneficiaries will see in Social Security in 2022 is a 5.9 percent cost-of-living adjustment (COLA) to monthly retirement checks and Supplemental Security Income (SSI) checks. The increase is the largest COLA since 1982.

The COLA will boost the average retirement check by $92, to $1,657 a month. The maximum monthly benefit for a worker who retired at full retirement age will jump by $197, to $3,345. SSI checks, for those with limited incomes and few financial resources, will get a lift, too. The maximum monthly SSI payment in 2022 will be $841 for an individual, up $47 from 2021, and $1,261 for a couple, up $70.

Estimated Average Monthly Social Security Benefits Payable in January 2022 
 Before  5.9% COLAAfter  5.9% COLA
All Retired Workers $1,565 $1,657 
Aged Couple, Both Receiving Benefits $2,599 $2,753 
Widowed Mother and Two Children $3,009 $3,187 
Aged Widow(er) Alone $1,467 $1,553 
Disabled Worker, Spouse and One or  More Children $2,250 $2,383 
All Disabled Workers $1,282 $1,358 

Source: Social Security Administration

The annual Social Security COLA is based on the change in prices of a market basket of goods. To measure these changes, the Social Security Administration (SSA) uses the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).​ For the 2022 COLA, the SSA measured the change in the average CPI-W index from July, August and September of 2021 to the average CPI-W index for the same three-month span in 2020. The percentage change between the two quarterly averages, 5.9 percent, is the COLA starting in January 2022.​

The 2022 COLA was so large because prices of goods and services measured in the CPI-W have significantly increased in the past year, due in part to a rebounding economy and COVID-19 outbreaks, which have both driven up energy prices and strained the world’s supply chains.​

Because the COLA calculation is backward-looking and fixed in time based on the change from the third quarter of 2020 to the third quarter of 2021, it does not always capture the full increase in goods and services if inflation persists beyond September, which it has. In the 12 months that ended in November, the CPI-W jumped 7.6 percent, and the Consumer Price Index for All Urban Consumers (CPI-U), the most common gauge of inflation, gained 6.8 percent. If inflation continues at this pace, it will erode the future buying power of Social Security payments.

Big hike in Medicare Part B premiums

Although the 2022 increase is substantial, most beneficiaries won’t see the full amount in their checks because Medicare Part B premiums are deducted directly from most Social Security retirement payments. Due to inflation (and because the 2021 Part B increase was limited by Congress), Medicare Part B premiums jumped to $170.10 for 2022, an increase of $21.60, from $148.50 in 2021.

Consider the person who has a $1,657.30 monthly benefit in 2022, up from $1,565 in 2021. They would have a net benefit (after the $170.10 2022 Part B deduction) of $1,487.20.

Those with the smallest Social Security benefit get hit the hardest by the Medicare increase, says Mary Johnson, Social Security and Medicare policy analyst for the Senior Citizens League, a nonpartisan advocacy group. “The folks with the lowest benefits see the smallest increase, yet they may be the same people who depend on Social Security for most, or even all of their income,” Johnson says.

For example, a person with a $1,000 Social Security benefit in 2021 would have gotten $851.50 a month after the 2021 Part B premium of $148.50 a month was deducted. In 2022, the person’s Social Security payment would rise to $1,059. Deduct $170.10 for Medicare, and that person would be left with $888.90 — just $37.40 more than in 2021.

From 2013 through 2022, Social Security COLAs have increased payments by 18.8 percentage points. Part B premiums have increased by 57.2 percentage points during the same period, according to the Senior Citizens League.


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