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The Social Security Administration announced Wednesday that its beneficiaries will see a 5.9 percent increase in their benefit checks starting next year — the largest boost to benefits in close to four decades.

The adjustment will be made for 64 million Social Security beneficiaries as well as 8 million Supplemental Security Income beneficiaries. Some Americans receive both benefits.

The cost-of-living increase, which will affect roughly 70 million people starting in late December and January, is tied to a measure of inflation that has surged this year as prices rise in a US economy emerging from the coronavirus pandemic.

Experts caution that millions of seniors will in reality see substantially less than a 6 percent bump, because Medicare Part B premiums are deducted from Social Security beneficiaries’ checks and are tied to seniors’ income. The increase in benefits will amount to roughly an additional $92 per month for seniors.


The Bureau of Labor Statistics said Wednesday that prices rose 0.4 percent in September compared to August. Overall, prices are up 5.4 percent over the last year. The “cost of living adjustment” that determines Social Security payment hikes is based on a different measure of inflation, but they both capture similar phenomenon in the economy.

The biggest program run by the federal government, Social Security is funded by payroll taxes paid by both workers and employers. Monthly payments then flow from Social Security primarily to retirees and people with disabilities, as well as to the relatives of workers who have died, among other groups. The program is the biggest source of retirement income for most seniors, representing more than 90 percent of retirement income for roughly a quarter of older Americans nationwide.

Prices have risen throughout the economy since the pandemic, diminishing the value of government benefits beyond Social Security. But while wages have climbed for workers along with inflation, people who do not work are often dependent on government programs to update their payments based on federal metrics that are sometimes out of step with price changes in the economy itself.


The average monthly Social Security payments for retired workers will rise from $1,565 to $1,657 starting in January, according to the Social Security Administration. Workers with disabilities will see an average increase from $1,282 to $1,358 after the increase kicks in.

“The guaranteed benefits provided by Social Security and the [cost of living adjustment] increase are more crucial than ever as millions of Americans continue to face the health and economic impacts of the pandemic,” AARP chief executive officer Jo Ann Jenkins said in a statement.

Also changing is how Social Security taxes are assessed. The program’s taxes are subject to a cap, because it was set up with the intention of having the amount workers paid into the system mirror what they receive in retirement. Currently, the maximum amount of earnings subject to the Social Security tax is $142,800, but that amount will increase to $147,000.

The Social Security benefit increase has averaged about 1.7 percent over the last 10 years. This year’s increase amounts to the biggest since 1982, experts say.

Most federal retirees will also receive the same 5.9 percent inflation boost to their annuities in January, though others will receive 4.9 percent boosts.

Some experts have long called for Social Security benefits to be tied to a measure of inflation that would more heavily factor in prices of health care and housing — two of the biggest costs facing seniors. The price of prescription drugs has exploded, for instance, rising by 16 percent in 2021 alone, according to one industry group.


“This is welcome but inadequate — health care and prescription drug costs have been going up way faster than seniors’ cost of living. People’s Social Security benefits have been eroding for decades, and will continue to erode even with this increase,” said Nancy Altman, codirector of Social Security Works, a nonprofit group.

The new payments will increase the burden on the federal government. Marc Goldwein, a budget expert at the Committee for a Responsible Federal Budget, said the jump could move up the date at which Social Security is projected to become an insolvent by as much as a year, to 2032.

“There’s been huge inflation, so seniors are about to get a big raise. The problem is that’s going to cut into Social Security’s finances,” Goldwein said. “It’s potentially a big new cost.”

The increases for federal retirees will be about twice the projected 2022 pay raise for current federal employees and also the largest cost-of-living adjustment since the 8.7 percent in 1982. For January 2022, federal employees are on track to receive a raise averaging 2.7 percent, with some variation by locality. Under the complex federal pay law, that increase as recommended by President Biden will take effect unless a different figure is enacted into law by the end of the year.