Inflationary fears have been worrying social security recipients about their cost of living adjustments to their monthly checks, but this year might see one of the biggest increases yet.
Legislation enacted in 1973 allowed for cost of living adjustments to social security checks to keep pace with inflation. According to the Social Security Administration, the latest COLA is 1.3% for social security benefits and social security insurance payments. Social security increased by 1.3% beginning with the December 2020 benefits which were payable in January 2021.
COLA is computed with a formula specified by the Social Security Act and is based on increases in the Consumer Price Index for Urban Wage Workers and Clerical Workers. This is calculated on a monthly basis by the Bureau of Labor Statistics.
The SSA adjusts its payments only once a year starting with those December benefits that are paid in January. This means that recipients would have to wait until December adjustments to see a new COLA percentage hike to be paid beginning January 2022.
The good news is that runaway inflation and unrelenting prices will likely see a larger COLA for 2022 than has been seen in decades. One advocacy group is pushing for a 6.1% increase for senior citizens due to a surge in inflation, CBS reports.
The bad news is that seniors will have to deal with the meager 1.3% increase for the rest of 2021 as prices continue to not let up. Inflation spiked 5.4% in June alone, which means a social security check received in June was worth less than what it was a month prior.
The Senior Citizens League, one of the nation’s largest nonpartisan seniors advocacy groups, is one of the groups being the push for larger and more standard COLA rates.
According to their research, social security benefits have lost over 30% of their purchasing power since 2000 due in large part to low COLAs and rising health care costs. They urge Congress to adopt legislation that would base COLA on inflation indices specific to seniors like the Consumer Price Index for the Elderly. By their account, this kind of index regularly puts the spending inflation for seniors at two-tenths of a percentage point higher than the rate at which the CPI-W does. They state that a senior who filed for benefits over thirty years ago would have received nearly $14,000 more in retirement had a consumer price index for the elderly been used versus the urban wage price index that the SSA currently utilizes for COLA increases.
Rising costs could also potentially grow more support for the 3% COLA Act, which pushes to have a guaranteed 3% COLA increase each year.
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