With a rapidly growing aging population, securing Social Security funds is now more crucial than ever. But how did we get here in the first place?
Seniors already grappling with higher health costs and the threat of COVID-19 may face another challenge next year: No increase in their Social Security checks.
A preliminary estimate by the Senior Citizens League found the 68 million Americans who rely on Social Security will receive no cost-of-living adjustment (COLA) in their benefits in 2021 because of meager inflation over the past year. That would keep the average retiree’s monthly check at $1,460.
“It’s going to mean they are going to have some very stiff challenges,” especially if they had to pay out-of-pocket medical costs to treat COVID-19, says Mary Johnson, a policy analyst for the Senior Citizens League, an advocacy group.
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If Johnson’s forecast plays out, it would mark the first time since 2015 that beneficiaries received no bump in benefits. This year’s COLA was 1.6%, or an average $23.40 a month, and recipients got a 2.8% hike in 2018, the largest since 2011.
In October, the Social Security Administration will announce its cost-of-living adjustment for 2021 based on average annual increases in the consumer price index for urban wage earners and clerical workers, or CPI-W, from July through September. The CPI-W largely reflects the broad CPI index the Labor Department reports each month.
Johnson projects the July-September data based on changes in the CPI-W over the past year. The index inched up just 0.1% in the 12 months through April but Johnson is forecasting a slight dip during the July-September period, largely because of plunging oil and gasoline prices that she believes will intensify.
Gasoline prices have tumbled 32% the past year, according to Labor Department figures. Also, consumer demand has nearly vanished for many services because of the coronavirus crisis, leading to sharp declines in air fares, hotel rates and other prices.
Yet Johnson says the CPI-W doesn’t reflect the spending patterns of seniors, who buy less gasoline, electronics and other products and spend more on items such as health care and food. Grocery prices shot up in April.
“This is not measuring the price changes experienced by retirees,” Johnson says.
She has called for the SSA to base its COLA on a proposed index for the elderly called CPI-E that would put more weight on health and other expenditures.
Since 2000, Social Security recipients have lost 30% of their buying power as COLAs increased a total 53% while the cost of goods and services typically purchased by retirees jumped 99.3%, according to the Senior Citizens League.
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