Soaring inflation is troubling for everyone, but when you’re retired, it can be a wallop.
The national average gas price is up by more than 39% from a year ago, while rents jumped a record 15.7% year-over-year in December, according to Zillow. And Medicare prescription drug premiums will increase almost 5% this year, according to the Centers for Medicare and Medicaid Services.
That’s weighing on many seniors, according to a survey by The Senior Citizens League that will be released February 8. Food costs ranked as the fastest growing cost for retired households, followed by housing and medical costs. About 45% of the 1,750 respondents said they had no retirement savings to augment their Social Security income.
Many retirees rely on 401(k)s and IRAs, where there's no programmed tweaking to keep pace with inflation. In addition, people nearing retirement usually shift their savings to bank certificates of deposit and bonds that don't have inflation safeguards.
The good news: Social Security has a 5.9% cost of living adjustment (COLA) increase that just kicked in; the highest in four decades. The 2022 COLA bumps an average monthly retirement benefit of $1,565 to roughly $1,657.
The bad news: The 14.5% increase in Medicare Part B premiums for 2022 pushes the standard monthly premium from $148.50 in 2021 to $170.10. (Medicare Part B covers doctors' appointments, outpatient hospital services, and some medical services not covered by Medicare Part A.)
And, by some calculations, inflation has been higher than the headline figure of 7%.
“New December CPI data indicates that inflation through December was actually 7.8%, a full 1.9 percentage point more than the COLA,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League.
What does that mean?
“An average retiree benefit increased by $92.80. However, current inflation of 7.8% means one’s benefit would theoretically need to have increased by $122.00 to be keeping up," Johnson said, "a shortfall of about $29.72."
Grounds for a Medicare refund
Meanwhile, “the Social Security Administration will be automatically deducting the largest Medicare Part B premium increase (dollar-wise) in program history which would further reduce the amount of COLA that people have to meet all other significant price increases,” Johnson said.
Medicare beneficiaries may, however, have grounds to ask for a refund on a portion of their 2022 Part B premiums.
“It appears that Medicare is overcharging 57 million older and disabled beneficiaries for their Part B coverage this year,” Johnson added.