Author: The Senior Citizens League (i): Contact: seniorleague.org
Published: 2020-09-16: (Rev. 2020-10-13)
Table of contents and important points:
U.S. Social Security beneficiaries are expected to receive a 1.3 percent cost of living adjustment (COLA) in 2021 – the second lowest ever paid, according to the Senior Citizens League (TSCL).
If the forecast turns out to be correct, this would be the fifth time since 2010 that there will be an extremely low or no annual inflation adjustment.
Questions about the fairness and accuracy of COLA raised by TSCL’s research, polls, and supporters will receive attention in Congress.
Main digestion
Our forecast is based on CPI data through August, and there will be a month of consumer price data before we get the official announcement in October, says Mary Johnson, social security policy analyst at The Senior Citizens League.
NOTE: COLA Benefits Announced 1.3% Increase for 2021: The U.S. Social Security Agency just announced that Social Security and Supplementary Insurance (SSI) incomes for Americans will increase 1.3 percent in 2021.
With 1.2 million supporters, the Seniors League (SeniorsLeague.org) is one of the largest non-partisan senior groups in the country. Their job is to nurture and support members and supporters, educate and inform seniors about their rights and freedoms as US citizens, and protect and defend the benefits that seniors have earned and paid for. The Senior Citizens League is a proud member of The Retired Enlisted Association.
Based on historical trends, there is only a 5 percent chance the COLA could rise above 1.3 percent and a 15 percent chance it could be lower. Although the May-August inflation rate suggests the COLA could rise to 1.4 percent, the most recent three-month rate from June to August and a new downward trend in gasoline prices seem to suggest it is likely to be 1.3 percent, ” so Johnson says.
If the forecast turns out to be correct, this would be the fifth time since 2010 that there will be an extremely low or no annual inflation adjustment. “This is further evidence that our inflation adjustment system is broken,” said Johnson.
The COLA was zero in 2010, 2011 and 2016.
In 2017 it was only 0.3%.
Since 2010, the annual COLAs have averaged just 1.4 percent.
That’s less than half of the 3 percent COLAs averaged between 1999 and 2009. At the same time, other costs for retirees, particularly healthcare and housing, have increased many times faster than headline inflation. However, these costs were not accurately reflected in COLA.
Why not?
A major reason has to do with whose “basket” the government uses to measure inflation and calculate the annual adjustment. Under current law, the social security COLA is determined by the percentage of change in the consumer price index for urban wage earners and office workers (CPI-W). This basket belongs to younger employed adults under the age of 62 and does not include the households of pensioners.
The CPI-W gives greater weight (or mathematical meaning) to consumables that are more commonly purchased by younger people, such as gasoline and electronics. Conversely, the CPI-W attaches less importance to housing and medical costs, two categories of expenditure that make up the largest share of expenditure in households of older consumers. These two categories have grown rapidly over the past decade, but are not accurately reflected in COLAs. If that wasn’t enough, COLA doesn’t include Medicare premiums. Research for the Seniors League found that Medicare Part B premiums are one of the fastest growing costs in retirement.
COLA is designed to protect the purchasing power of social security benefits from erosion when prices rise. However, if the annual inflation adjustment is not accompanied by rising costs, the purchasing power of benefits will decline. This affects the standard of living of all beneficiaries. Research by Johnson found that social security benefits have lost about 30 percent of purchasing power over the past 20 years.
COLA fairness and accuracy
Questions about the fairness and accuracy of COLA raised by TSCL’s research, polls, and supporters will receive attention in Congress.
Recently, the US Government Accountability Office (GAO) was asked to review efforts to measure the cost of living for elderly populations. In its report, GAO noted that “The US Bureau of Labor Statistics (BLS) prioritizes accuracy, timeliness, and relevance in developing consumer price indices (CPI) for subpopulations of workers and older Americans.”
The GAO continued, “The BLS has not assessed the extent to which their existing data is sufficient to produce CPIs that reflect what these subpopulations are paying, where they shop, and what they are buying … Without an assessment, federal pension benefits could potentially be subject to adjustments subject to inaccurate information. “
TSCL is committed to alerting members of Congress that there could be an extremely low COLA in 2021 and that corrective action is needed, particularly to address the potential for soaring Medicare premiums.
TSCL suggests an emergency COLA of at least 2.5 percent. The COLA for Social Security is expected to be announced on October 13, 2020.
(i) Source / Reference: The senior league. Disabled World makes no guarantees or warranties in connection therewith. Content may have been edited for style, clarity, or length.
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Journal: Disabled World. Language: English. Author: The Senior League. Electronic publication date: 2020-09-16. Last revised date: 2020-10-13. Reference Title: “2021 COLA: 1.3% predicted”, Source: 2021 COLA: 1.3% predicted. Summary: U.S. Social Security beneficiaries are expected to receive a 1.3 percent cost of living adjustment (COLA) in 2021 – the second lowest ever paid, according to the Senior Citizens League (TSCL). Retrieved on December 15, 2018 from https://www.disabled-world.com/disability/social-security/usa/cola-2021.php – reference category number: DW # 121-13876.
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