The COLA social security adjustment does not match the prices that pensioners pay
Don Bayley | Vetta | Getty Images
This year’s social security cost of living adjustment was 1.3%, but many of the costs faced by seniors are rising much faster.
In 2021, the estimated average monthly benefit increased by $ 20 per month.
According to a new analysis of consumer price index data by the Bureau of Labor Statistics of the Senior Citizens League, a non-partisan senior citizen group, spending has risen dramatically over the past year.
More from the new path to retirement:
Check out more retirement news here.
From March 2020 to March 2021, the fastest growing cost was car and truck rentals, which rose 31.2%. Laundry equipment followed, up 24.2%; Gasoline 22.2%; and domestic heating oil 20.2%.
Some prices, such as prescription drugs and medical expenses, remained constant even though doctors’ services increased 5.3%.
Granted, all consumers are struggling with these rising prices, not just seniors. The Seniors League selected the list based on the costs that affect retirees the most.
Because older Americans often live on a fixed budget, which typically includes social security benefits, they can find it more difficult to bear these higher costs.
“With inflation rising so rapidly, there is an erosion of purchasing power right now,” said Mary Johnson, social security and Medicare policy analyst for the league.
As measured by the index that calculates the annual cost of living adjustment for social security – the consumer price index for urban wage earners and office workers (CPI-W) – inflation has increased since last year.
The CPI-W at the end of March was more than 3% higher than a year ago.
In addition, inflation rose 1.4% in the first quarter of 2021 compared to 0% in the first quarter of 2020. The last time inflation rose so rapidly was in 2012.
The measurements suggest what can happen to the social security cost of living adjustment for 2022, usually announced by the social security administration in October.
“If we see a sequel, we may see the highest COLA since 2008,” said Johnson.
In 2008 the Social Security Agency announced a 5.8% increase for the following year. Such a large increase has not been recorded since then. The average cost of living adjustment since 2010 was 1.4%.
However, it will take another six months for a final calculation to be made. Whether there will be an increase in monthly social security audits will ultimately be determined by September based on the CPI data.
A recent poll by the league found that 62% of retirees support a guaranteed minimum for annual increases in social security benefits. The survey was conducted from January to April and included 1,125 participants.
The league advocates a guaranteed annual minimum increase and a switch to the consumer price index for older people (CPI-E). Some proponents believe the index is a better measure of the cost seniors face versus the CPI-W.