By Mary Johnson, editor
Will the 5.9% cost-of-living adjustment (COLA) be enough to meet rising costs in 2022? Will Social Security recipients receive a big enough boost next year in order to afford groceries for the entire month, instead of running short before the month ends? From what I’m reading, the rate of price inflation is expected to ease but is still likely to rise — by roughly 3%, according to David Payne of Kiplinger.com. That means that inflation isn’t through with us yet. It appears likely that consumers will be spending more on a number of big-ticket items. Here are some of the spending categories that may see continued high prices in the New Year.
- Food: Normal grocery inflation is usually in the 1% to 2% range. But the USDA estimates that, in 2021, food prices increased 3.5% with the largest price increases for meat categories: beef and veal up 9.6%, pork up 6.3% and poultry up 5.6%. In 2022 the USDA expects that food prices will continue to climb about 2.5%.
- Rental housing: A lease for senior housing typically includes a clause for an automatic 5% annual rent increase. But according to Alicia Adamczyk of CNBC, the national median rent increased by 11.4% in 2021, compared with just 3.3% in 2017, 2018 and 2019. Rents are expected to surge again in 2022, in reaction to the expiration of eviction moratoriums that forced normal rent increases to be put off temporarily.
- Owner housing: Rising costs are expected to affect homeowners as well, particularly for people who are refinancing or planning on renovating or repairing an older home. Mortgage rates are expected to rise in 2022, in reaction to higher home prices, the costs of building and materials, and rising interest rates. Higher prices of homes will also mean higher local real estate taxes and higher homeowners insurance costs.
- Heating your home: Household expenditures for all major home heating fuels are forecast to increase significantly according to the U.S. Energy Information Administration (EIA). Compared with last winter the EIA estimates that propane expenditures will rise by 54%, heating oil by 43% natural gas by 30% and electricity by 6%.
- Drug prices: Prices on 1,283 prescription drugs increased by 16% in the first seven months of 2021, compared to the same period in 2020. The Centers for Medicare and Medicaid Services estimate that prescription drug costs will increase 5% in 2022, and the Part D out-of-pocket threshold before reaching the catastrophic phase of coverage is growing by 7.6% from $6,550 in 2021 to $7,050 in 2022.
Sources: “Inflation Cools But Pressures Lurk,” David Payne, Kiplinger.com. Food Price Outlook, 2021, USDA, September 27, 2021. “Rent Is About To Go Up Again — Here’s Why,” Alicia Adamczyk, CNBC. Winter Fuels Outlook, U.S. Energy Information Administration, October 7, 2021. “Report: Prescription Drug Prices Continue to Rise Throughout 2021,” Single Care, August 5, 2021.