What Happens When COLA Can’t Keep Up?
Social Security’s annual cost-of-living adjustment (COLA) is no longer keeping up with the prices retirees are paying for goods and services. This year’s COLA was 1.3%. That equates to about $20 more each month in benefits on average. That is simply not enough money to keep up with the rising costs retirees are facing.
A CNBC report discovered that the common expenses seniors spend on shot up this past year with gasoline up over 22%, home heating oil over 20%, food up about 10%, home health care up almost 6%, and doctor’s visits about 5%. It concluded that because older Americans often live on a fixed budget — with many people relying on Social Security benefits — having to absorb these higher costs has been a financial burden.
The Bright Side
This year’s inflation may bring a bigger cost-of-living adjustment (COLA) for next year. In fact, experts predict we may see the highest COLA since 2008. During the height of the Great Recession, the Social Security Administration announced a 5.8% COLA. That was short lived. For the past ten years, the Social Security COLA has averaged about 1.4%. But the economic impact of the pandemic may contribute to an increased COLA. We will have to wait until fall to find out what the 2022 COLA will be, but experts all predict it will be higher than this year’s 1.3%.
Guaranteed Minimum Benefits
We are also seeing calls for a guaranteed minimum increase in annual Social Security benefits. A shift to the Consumer Price Index for the Elderly, or CPI-E could be monumental. Advocates for this index believe that CPI-E is a better measure of the costs seniors face versus the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, currently used.
Social Security Expansion Act
The Seniors Trust shares a similar mission. It is committed to ensuring passage of the Social Security Expansion Act. If passed, this landmark piece of legislation will make four major changes to Social Security for retirees:
• Benefits will be increased for most recipients by about $65 per month.
• The Consumer Price Index for the Elderly (CPI-E) will be used to calculate Social Security Cost-of-Living Adjustments (COLAs) instead of the Consumer Price Index for Urban Wage Earners (CPI-W) used currently. The CPI-E takes the unique spending habits of seniors into account — particularly regarding the cost of healthcare — and offers a more realistic COLA for retirees.
• Increase minimum Social Security benefits to provide higher payments to seniors and greatly reduce senior poverty.
• Enhanced benefits would be set to greatly reduce senior poverty and guarantee the long-term solvency of the Social Security program.
A poll by The Seniors Trust shows overwhelming support for bigger monthly benefits and a guaranteed COLA. The Seniors Trust survey saw unanimous support, with 99.67% of respondents saying that Congress should pass The Social Security Expansion Act, giving seniors a $65 monthly benefits increase and a guaranteed annual COLA.
