Why Next Year’s Big COLA Social Security Raise Will Be Worthless
Why next year’s COLA increase is nearly worthless when you factor in inflation: This year’s Cost of Living Adjustment (COLA), which aims to ensure recipients of Social Security and other federal benefits are able to afford food and necessities as inflation peaked at forty, might not be enough.
Earlier this month, the Senior Citizens League predicted an 8.6% increase in payments over the next year – the biggest increase since 1981. However, the state of the economy and the functioning of the COLAs mean that beneficiaries could still find themselves in difficulty, with the cost of food, gasoline and consumer products continuing to rise.
Who benefits from the cost of living adjustment?
Only those who receive Social Security are eligible for the COLA increase. This includes anyone aged 62 or over and retired for five years or aged 55 and retired for ten years or more. Other beneficiaries may also include a disabled pensioner who has been retired for five years or the spouse of a deceased pensioner who receives lifetime benefits.
Anyone who receives Social Security payments will automatically qualify for a cost-of-living adjustment, as the government works to ensure recipients can afford to live.
How is the COLA decided?
Cost of living adjustments are determined based on inflation, as documented by the Consumer Price Index. The assumed 8.6% COLA increase is based on back-to-back increases of more than 8% in the consumer price index through 2022, with inflation rising 8.3% in April of that year. year.
Last October, the Social Security Administration set the COLA after consumer prices began to rise. Social Security payments increased by 5.9%, but with inflation continuing to rise, that wasn’t enough.
Is it sufficient?
Not only was this year’s cost-of-living adjustment several percentage points lower than inflation recorded throughout the year, but even if the next increase in payments exceeds 8%, beneficiaries must also wait that the next increase is implemented to benefit from it.
This means nearly 70 million people will feel the impact of inflation this year until the next payment increase is implemented next year. The 2022 COLA payments came in January this year, meaning the rumored 8.6% increase will come into effect in another eight months.
Peter Anastasian, the senior vice president of the Wealth Enhancement Group, expressed doubts that this year’s COLA will be enough for seniors and other Social Security recipients to support the cost of living.
“The increase in Medicare premiums has also increased significantly, offsetting much of the increase in Social Security,” Anastasian told ConsumerAffairs, adding that the cost of basic necessities has increased by more than 10% d year on year, with the elderly feeling the impact. inflation this year more than at any other time.
If next year’s COLA exceeds 8%, it will help, but it will not make up for the year of struggle seniors have had to face this year. Whether that will be enough next year remains to be seen.
Jack Buckby is a British author, counter-extremism researcher and journalist based in New York. Reporting from the UK, Europe and the US, it strives to analyze and understand left and right radicalisation, and reports on Western government approaches to pressing issues of today. His books and research papers explore these themes and offer pragmatic solutions to our increasingly polarized society.