2022 will be a tough year for US retirees: two bad news for seniors

Retirees received seemingly good news recently when the Social Security Administration announced that it had raised pensions due to the cost of living adjustment (COLA) in 2022 by 5,9%. But why is it not happy, the publication explained. MSN.

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This is the largest increase in four decades, and it means that retirees will, in theory, end up with much more money. The problem is that this good news was followed by two really bad news, which means most seniors won't get better despite the bigger checks. In fact, many will find themselves in worse financial position.

That's why:

1. Medicare premiums increase 14,5%.

Seniors generally rely on Medicare for health insurance. In fact, most retirees have their Medicare premium charged directly from their Social Security accounts.

Unfortunately, Medicare premiums will skyrocket in 2022. The standard monthly premium will rise from $ 148,50 in 2021 to $ 170,10 in 2022. That's an increase of $ 21,60, or 14,5%, and will absorb a significant portion of the COLA premium that retirees receive.

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The Medicare Part B deductible will also increase by $ 30 next year, from $ 203 in 2021 to $ 233 in 2022.

2. Reports show inflation at 6,2%.

The COLA index is based on the change in the consumer price index (CPI) for urban wage earners (CPI-W). COLA is calculated by comparing CPI for July, August and September with CPI for the same months of the previous year. This comparison showed an inflation rate of 5,9%, which is why older people receive a 5,9% increase in their pension.

However, a more recent measure of inflation—an annual comparison of the Consumer Price Index for All Urban Consumers (CPI-U) in October 2021—showed that prices were actually up 6,2% from the previous year.

At first glance, it’s easy to see that a 5,9% increase will not help seniors very much to maintain their purchasing power if the prices of goods and services are up 6,2%, especially if the Medicare premium increase is eating up most of the extra money from retirees.

Retirees are likely to run into financial deficits next year, despite large increases in benefits, as their checks simply cannot cover additional medical costs and higher food, heating and transportation costs.

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And their problems are likely to be compounded by the fact that most older people rely on their savings as a supplement to social security, and inflation is eating away at the value of their savings accounts.

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