If you’re plugged into the national news, you’ve probably heard that inflation is reaching an all-time high. The U.S. cost of living in 2022 is increasing faster than it has in decades, as the price of food, real estate, healthcare, transportation and even homeowners insurance and car insurance goes up. Unfortunately, average wages for workers aren’t keeping up with the current trajectory of inflation, which is putting many Americans in a difficult financial situation.
Just recently, it was announced that the Social Security cost-of-living adjustment (COLA) for January 2022 was 5.9%, the highest increase in 40 years, due to the current increased cost of living. It’s been predicted that the Social Security COLA for 2023 could be as high as 8.9% or even above.
And it’s not just seniors who are feeling the impact of the higher cost of goods and services in the U.S. Americans of all ages are being forced to evaluate where they can afford to live and work. Because some states have a lower cost of living than others, many people are relocating to save money and stretch their dollar further as inflation takes hold of the economy. In this guide, we’ll highlight some recent statistics about the cost of living in the U.S. and which states are the cheapest and most expensive to live in.
- Between March 2021 and March 2022, the all items index increased 8.5%, before seasonal adjustment. It marks the largest 12-month increase since the period ending in December of 1981.
- The price of gas increased significantly in March 2022. The gasoline index was up more than 18% percent over the month. Gas price inflation accounted for more than half of the all items index monthly increase.
- The food index increased 8.8% between March 2021 and March 2022, the largest 12-month increase since the period ending in May of 1981.
- Grocery store prices are also rising. The food index increased 1% percent in March 2022 and the food at home index increased 1.5%. Restaurant prices have increased, but not as significantly. The food away from home index rose 0.3% in March.
- The combined index for meats, poultry, fish and eggs increased nearly 14% between March 2021 and March 2022. One of the biggest increases was for beef, which increased 16% over the last year.
- The cost of airfare has gone up in 2022. The index for airline costs increased 10.7% in March, after rising 5.2% in February.
- Healthcare costs in the U.S. are getting more expensive. In March 2022, the medical care index increased 0.5% in March, which also includes a .05% increase in the index for physicians’ services. However, the index for prescription drugs fell 0.2% in March.
- The CPI shows that used car prices may finally be dropping. The index for used cars and trucks fell 3.8% in March. This is the second consecutive monthly decline following many months of cost increases.
- The shelter index, which measures costs associated with housing, increased 5% over the last year, which is the biggest 12-month increase since May of 1991.
- The index for household furnishings and operations grew by more than 10% over the past year. It was the biggest 12-month increase since the period ending in July of 1975.
Cost of living adjustments
As mentioned previously, one of the biggest indicators of inflation is that the Social Security cost-of-living adjustment (COLA) for 2022 is one of the biggest increases since the 1980s. When the U.S. cost of living goes up, the Social Security COLA increases to help seniors offset rising prices.
Even still, seniors who rely on Social Security benefits are still largely impacted by inflation. So much so, that new legislation is attempting to change how Social Security COLA is calculated for benefits recipients over age 62. Here are some statistics about the current U.S. COLA:
- Social security benefits will increase by 5.9% for 2022, which is the highest COLA since 1982. (Kiplinger)
- Experts are predicting that the COLA increase next year could reach an all time high of 8.9% or above, based on the potential 2023 cost of living increase. (Fortune)
- Americans who receive Social Security benefits will receive an average of $1,657 per month in 2022, up from $1,565 the year prior. For couples who both receive Social Security benefits, the average monthly benefit will increase by $154, from $2,599 to $2,753. (Kiplinger)
- For 2022, the Social Security COLA was largely driven by the cost of energy, and specifically, gas. This year, a gallon of unleaded gasoline costs $3.18 on average, a big increase from around $2.19 last year. (AARP)
- In 2021, the Social Security COLA was only 1.3%, despite price increases triggered by the COVID-19 pandemic. That raised Social Security Income by roughly $20 per month, on average. (Fortune)
- For Americans who receive Social Security benefits, the average income check for 2022 will be $92 larger each month than it was last year. (Fortune)
- One of the biggest reasons why the government wants to change COLA calculations is due to the high cost of healthcare, particularly for seniors. (Fortune)
Most expensive states to live in 2022
Every year, the Council for Community & Economic Research (C2ER) publishes a report that details the cost of living across the country and highlights the most expensive and least expensive states. The ranking is based on a price index that is calculated using the cost of food, housing, transportation, utilities and other factors in all 50 states and Washington D.C.
According to the 2021 C2ER study, Hawaii has the highest cost of living, with an index of 193.3. The results showed that Hawaii has an extremely high cost of housing, utilities and groceries. Washington D.C. was the second most expensive place to live, although its cost of living index was much lower than Hawaii’s index, at 158.1. Unsurprisingly, New York and California also ranked in the top 10 most expensive states. Major metropolitan areas like New York City, Los Angeles and San Francisco consistently appear on lists of the most expensive cities.
Here is the full list of the most expensive states to live in based on the 2021 C2ER study:
Least expensive states to live in 2022
While the most expensive states are relatively spread out across the country, the least expensive states are mostly concentrated in the Midwest and South. Based on C2ER’s cost of living study, Mississippi is the cheapest place to live. According to the index, Mississippi has the cheapest housing costs in the country. It also has a low cost of groceries, even compared to other states in the region, like Alabama and Georgia.
The second cheapest state is Kansas, which stands out for its low cost of groceries. Out of the 10 least expensive states to live in, Kansas has the cheapest grocery costs. However, it also has the highest cost of transportation and the most expensive healthcare out of the 10 least expensive states to live in. West Virginia, which ranked 8th on the list of the 10 cheapest states, has the lowest cost of healthcare, according to the C2ER study.
In the table below, you can see the full list of the 10 cheapest states to live in, based on the cost of living:
Inflation is impacting every American, regardless of age or location. The cost of living in the U.S. has been steadily increasing, but in the first half of 2022, the rate of inflation has reached all-time highs that haven’t been seen since the 1980s. The cost of essential living expenses, including gas, food, healthcare and housing, is forcing many people to make spending sacrifices, while others move to states with a lower cost of living.
If you’re thinking about moving to a different city or state, you can use our cost of living calculator to see how much things cost in various places around the U.S. The calculator will also show you how much income you need to bring in order to maintain your current lifestyle.