The cost of living adjustment for Social Security benefits in 2022 will be 5.9% — the highest COLA boost in almost 40 years.
Cost of living adjustments to Social Security benefits are intended to help seniors living on fixed incomes afford everyday items as they increase in price. The Senior Citizens League, a bipartisan interest group, claims that the way in which the COLA is calculated does not take into account the items that most seniors spend their money on and need every day to survive.
The league is lobbying Congress for a guaranteed minimum annual increase as well as a shift to the Consumer Price Index for the Elderly, or CPI-E. Some advocates believe that the index is a better measure of costs seniors face than the CPI-W.
Each year’s COLA is determined using the Consumer Price Index for Urban Wage Earners and Clerical workers, or CPI-W. This index takes into account things like energy prices — mainly gasoline — that disproportionately affect younger workers versus retirees. In October alone, for example, gasoline was one of the categories that contributed to the highest increases in the overall inflation index. It is considered to be a main determining factor for price surges, and it affects almost every sector, from vehicle transportation to airline and shipping cargo — hardly on the top of the list for retirees.
One difference between the CPI-W and the CPI-E is the weighted average for healthcare costs. The CPI-W counts 5.6% of the overall index as healthcare expenses, whereas the CPI-E factors in roughly 11% of its index to healthcare. Seniors age 65 and older spend more than twice as much on healthcare than younger consumers spend, and those age 75 and older spend nearly three times more, according to the National Committee to Preserve Social Security and Medicare.
Perhaps the most striking of recent product categories to push the current COLA out of relevance is food prices.
The red line represents the level of COLA increases over the past decade. While basic grocery items like bacon, eggs and milk have had fluctuating prices, the overall trend has been for these items to fluctuate above COLA-adjusted levels. Moreover, since the beginning of the pandemic specifically, increases in these basic grocery items have been far above the increase in cost of living adjustments for Social Security.
Even accounting for the 5.9% increase in 2022 benefits, the price increases for eggs and milk far outpace any adjustment. Notwithstanding October’s added increase, consumer prices for the index including milk and eggs are up 10.5% for the year ended September 2021 — compared against a 5.9% COLA.
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