2 Good Reasons Why the New 2022 Social Security Increase May Be a Bad Problem

You may not be concerned about the Social Security increase and Medicare right now, but there will come a day when you will. So when I say that there are only two reasons to be concerned, well, it’s because I don’t want to scare you out of your socks right here at the beginning of the year.

Senior woman being examined by doctor covered by Medicare and the Social Security increase

After all, if you are on Social Security or Disability right now, you are probably celebrating the largest increase in benefits in decades: a 5.9% increase is a substantial amount (the highest since 8.2% in 1982). On average, it will mean about a hundred bucks a month per person more than in 2021 will be arriving beginning this week to recipients. With inflation running rampant, it’s a welcome sigh of relief to help fight against it. But is it all high fives and smiles with Social Security or is it really just a bad problem?

What Could Be Wrong with Your New Social Security Increase?

First of all, your increased benefits come with a “but”. That but is this: you are also getting a major cost increase in your Medicare premiums as of January 2022. What was $148.50 a month last year has increased to $170.10 per month, this year. That’s a big chunk of money that comes right out of your check before you ever get your hands on a single penny.

Let that sink in a moment.

An extra $21.60 is taken out and that is about a 15% jump in premium costs! That’s way more than the inflation rate for any month of last year by more than two times and is shocking. Who more than seniors and disabled people need relief from medical costs and insurance costs? And it means this: Your overall benefit increase of 5.9% was just reduced by about 15% on average because of it.

More Issues with Your Medicare and Choices

You could only be unaware of Medicare and the choices that you have with it if you were hiding under a rock between last October and December. That is when there was the annual open enrollment period for seniors who want to make changes to their coverages. Once you are in the system, it becomes confusing to evaluate and make these changes and that’s why you see and hear hundreds if not thousands of ads ever week about them on TV and radio.

For sure, you can get coverages that are cheap or even free. You can also get the gold wrapped coverages that literally cost hundreds of dollars a month and that’s on top of your now $170.10 Medicare premium fee that comes out of your Social Security benefits.

Confusion Reigns

Besides the choosing of doctors that may be in your plan, or making sure that the services you regularly need are covered, there is the huge problem of whether or not your medicines are covered by a plan. That little issue can mean that you may have to pay big time for the meds (if there are any new ones) that are not covered. Even the meds you took last year may change in coverage or go up in cost.

A big problem is also you never quite know if you will be prescribed new meds that are not on your formulary when you make the choices. Even with coverages, good coverages by plans, you can still wind up having to pay hundreds of dollars for a prescription that is covered.

All of that and more makes choosing difficult and stressful, even when there is help from advisors when you choose. And guess what, you need to re-evaluate your choices every year to feel confident that you have the best coverages for your needs that you can afford.

The Inflation Factor and Social Security

While the benefit increase this year was the highest in four decades, we have to remember that it means that inflation is very high and this increase is just a part of what will help. Prices on just about everything are up and 5.9% won’t cover them all.

One of the biggest complaints that seniors have had, and rightfully so, is that the inflation rate calculation is not calculated with a senior’s expenses in mind. Medical costs—which seniors pay at a much higher frequency than younger healthy people do—are a small part of the calculation. Gas prices are heavily calculated and seniors generally do not drive as much or commute, so those expenses are also over-calculated in the index used. Those and even more items are the benefit calculations that Social Security uses that are less than suited for it.

For many years, changing the index has been brought up and while some minor changes have been made, the biggest discrepancies remain.

Final Thoughts

As this new year begins and the first new benefit payments arrive at your bank or your Mom and Dad’s, keep in mind that it doesn’t insure that managing finances is now not an issue.

Experts—even those at the Fed—differ on inflation projections for 2022. Some are optimistic that the supply chain issues and labor shortages will ease in 2022 and bring the annual rate down to about 2.6%. Others fear that that won’t happen as quickly and if it doesn’t, we could be facing similar or worse inflationary actions in 2022.

It’s better to plan for the worst and hope for the best.

While the new Social Security increase that is now part of the benefits is great to have, it means that you can also expect that prices will continue to climb, medical costs will increase, and that being a better money manager will become even more important than ever. Unfortunately, I have to say that every year.

Have you planned your budget for 2022 yet? Have you checked in with your parents or grandparents to see if they have a plan? It’s not prying into the finances if you are asking the same questions they need to ask themselves.

If you already know they are struggling, they will appreciate help and you can learn about the needs of seniors from them because at some point down the road you will find yourself in their shoes. Now is the perfect time to start learning, isn’t it?

Leave a Reply

Your email address will not be published. Required fields are marked *

Want to save even more?

Join our community today to get our weekly emails including blog posts, updates, saving tips, and more.