Here's when the Social Security cost-of-living increase goes into effect

Senior citizens and others who receive Social Security checks will soon see a 5.9% increase in their monthly payments, the biggest annual "raise" since 1982. But experts warn that the boost may not be enough to offset fast-rising inflation. 

On top of that, seniors will be paying more for their Medicare coverage in 2022, which will also eat away at the increase in their Social Security benefits.

The cost-of-living adjustment, or COLA, goes into effect with the December benefits, but those will be paid in January. The payment dates are determined by the recipient's birthdate: 

• People born on the 1st through the 10th of the month will get their COLA-adjusted checks on January 12
• People born from the 11th to the 20th of the month will get their checks on January 19
  
• And those born after the 20th of the month will get their payment on January 26

The Social Security Administration said it mailed notices to all recipients in December to alert them to their COLA increase, but the information can also be found online in the message center in recipients' my Social Security account. 

The COLA increase represents the largest in about 40 years, due to this year's rising inflation. Each year, Social Security payments are adjusted to reflect the change in prices of goods like food and gasoline — but this year has proved to be a struggle given that the benefit's 2021 cost-of-living increase was a meager 1.3%. That meant seniors were coping with the highest inflation in four decades throughout 2021 on top of a benefit that had barely budged. 

The hope is that the more generous COLA increase that goes into effect next month could help seniors keep ahead of inflation, but experts are skeptical. 

"We are still going to see this tremendous problem with prices increasing faster than the COLA," said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League, an advocacy group. "Even with that 5.9% COLA, inflation through November was up 6.8% for the past 12 months, and it looks like economists are forecasting that may continue."

She added, "So, retirees, anybody living on a fixed income, need to be aware that the 5.9% may look like a bigger increase than we've ever gotten. But once they go through their household budget, they will realize it still won't pay for all the increasing bills."

Average benefit increase: $93 a month

It's easy to see how the benefit increase may evaporate. 

The average beneficiary will receive an extra $93 a month, the Social Security Administration said, meaning the typical monthly check will rise to $1,658 in January from $1,565 previously. The spouse of a retired worker will see a roughly $47 bump, lifting average monthly benefits from $794 to $841 including the 5.9% COLA adjustment. Disabled workers will get a $75 increase on average, from $1,283 a month to $1,358, according to the agency.

However, the standard cost for Medicare's Part B is jumping 14.5% to $170.10 per month starting in 2022, an increase of $21.60, according to the Centers for Medicare & Medicaid Services. 

And daily costs are also on the rise: gasoline shot up almost 60% in November compared with the prior year, while food prices have increased about 6%, the government said earlier this month. Meat, poultry and other proteins rose almost 13%. A recent survey by Gallup found that almost half of respondents said that inflation is causing financial hardship.

"If they want to buy meat, or if they are buying gas or have home heating fuel, that [COLA] increase is going to get crushed by those expenses that have gone up," noted Kelly LaVigne, vice president of consumer insights at Allianz Life. 

LaVigne noted that Social Security was designed to be a supplement to retirement income, and it currently replaces about 40% of the average American's income in retirement. But 4 in 10 older Americans rely on the monthly benefit as their sole source of retirement income, according to a 2020 study from the National Institute on Retirement Security.

Perhaps it's not surprising that 25% of Americans see rising inflation as the single biggest threat to their retirement plans, compared with 8% a year earlier, Allianz found in a new survey. 

Biggest Social Security mistake

For most Americans, Social Security is their biggest retirement asset, but many don't understand how it works. And it's easy to make mistakes, said Laurence Kotlikoff, an economics professor at Boston University whose new book "Money Magic" — which gives detailed advice on Social Security — comes out early January. 

The biggest mistake that people make? Claiming the benefit before they turn 70, when their monthly payments would hit their maximum, Kotlikoff noted. 

Claiming Social Security benefits before you reach your full retirement age (which is determined by your birth year), reduces the annual payment you receive by about 7%. 

But for each year you wait to claim beyond your full retirement age, your Social Security benefit rises as much as 8% per year. There are very few investments that earn that type of annual return, experts note.

"Only 6% wait until they are 70, and 80% should," Kotlikoff said.

And with more baby boomers retiring early due to the pandemic, many might be tempted to claim Social Security benefits as soon as they can, which is age 62. But putting off claiming the benefit becomes increasingly important when inflation is high. 

"You want a bigger share of your benefits protected against inflation, and that is what happens if you wait," Kotlikoff advised.