Many seniors are looking forward to getting their first Social Security check in 2022. That's because there's been lots of news about a major cost of living adjustment (COLA) that's coming this year -- and COLAs are better known as Social Security raises.
Unfortunately, when you do get your first payment of 2022, you may be disappointed to find out it's not as much money as you'd think. Here's why.
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Your Social Security benefits boost may be smaller than expected for a simple reason
Retirees have probably heard they'll get a 5.9% COLA in 2022. If you've seen this number, you may be expecting your first check of the year to be 5.9% larger than your monthly payment was last year.
One thing you can't forget, though, is that you need to take Medicare premiums into account. Many retirees get these premiums directly withdrawn from their monthly Social Security checks. As a result, when Medicare costs go up, this affects the amount of Social Security benefits sent out.
Medicare Part A is generally available at no cost, but Medicare Part B premiums can be expensive for many retirees. In 2021, the standard premium for most seniors was $148.50 per month. In 2022, however, this premium is rising to $170.10.
The big bump up in Medicare costs will result in most seniors paying $21.60 per month more out of their Social Security checks to cover their healthcare expenses. Although that may seem like it's not a huge sum, it can take a big bite out of the raise that Social Security will provide this year.
Say, for example, you were getting Social Security benefits of around $1,500 per month in 2021 and you got a 5.9% increase to your monthly benefit. That would theoretically give you $88.50 more in your check. But the Medicare premium eats up nearly 25% of that amount, leaving you with a check that's only about $66.90 higher.
If you were hoping to see a $1,588 payment when you get your first 2022 Social Security check and you only get a $1,566 payment, that could affect your monthly budgeting. That's especially true when your increased check may already fall short of actually keeping pace with the inflation many retirees are experiencing.
There could be some good news on the horizon
Retirees may get a reprieve from this large Medicare premium increase that'll eat up a big portion of their raise. Secretary of Health and Human Services Xavier Becerra announced on Jan. 10 that he wants the Centers for Medicare and Medicaid Services to take another look at this year's premium increase.
Becerra cited a change in price to the Alzheimer's drug, Aduhelm, which saw a 50% drop in costs as of January 2022. While the drug cost $56,000 annually in the past, it will now go down to $28,000 per year based on recent manufacturer estimates.
If Medicare does reassess this premium increase, retirees may get to keep more of their Social Security raise and future checks this year may not be as disappointing as the first one. Of course, seniors do need to remember that rising prices in other areas may still eat away at any added buying power the 5.9% raise would theoretically provide and should plan accordingly.
