In today’s post, we are going to play a little game: Two Truths and a Lie. We will share three “facts”about Social Security cost-of-living adjustments (COLAs), and you try to guess which one is false. No worries! Of course, we’ll reveal the falsehood and provide an accurate statement, so you know the real truth.
COLA is tied directly to inflation. Social Security COLAs are based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). That tracks the costs of common expenses such as food, gas, etc. Many senior advocates are pushing to calculate Social Security COLAs using a senior-specific index. The Consumer Price Index for the Elderly (CPI-E) is more indicative of the expenses commonly incurred by retirees.
COLA is not guaranteed. Social Security recipients are not guaranteed a boost in benefits. Because COLA is tied to inflation, if there is no measurable rise in the CPI-W from one year to the next, there will be no COLA. It’s happened many times in the past. According to the Social Security Administration, as recently as 2015 there was a 0.0 percent COLA. Following the Great Recession, both 2009 and 2010 saw no COLA.
There could be a negative COLA. If inflation decreases from one year to the next, Social Security benefits will be adjusted downward.
According to an article by The Motley Fool, that last “fact” is totally false. Social Security benefits are not adjusted downward for shrinking inflation. The worst that can happen is that benefits remain stable. Should that happen, seniors are protected from “losing money” by the hold harmless rule. In a nutshell, if seniors have their Medicare Part B premiums automatically deducted from their Social Security benefits, they can’t see their benefits go down if Medicare premiums go up by a greater amount.
The Seniors Trust is committed to improving the financial well-being of America’s retirees through the passage of The Social Security Expansion Act — and that’s a fact! This landmark legislation will give retirees an immediate benefits increase of about $200 a month, a fair annual COLA, increased minimum benefits, and will ensure the long-term solvency of the Social Security program. Please join us in our efforts urging Congress to pass this important bill today.