Social Security's cost-of-living adjustment could be higher next year. But that doesn't necessarily mean the money will go fartherMay 12, 2021
- Next year's Social Security cost-of-living adjustment could be 4.7%, according to a preliminary estimate.
- The possible boost is based on calculations from Bureau of Labor Statistics data.
- Just how much any increase will benefit retirees will depend a lot on inflation.
Social Security beneficiaries could be in for a bigger cost-of-living adjustment next year, if current economic trends continue.
But just how much farther an increase to those monthly benefit checks will go will depend a lot on inflation.
The Senior Citizens League, a nonpartisan senior group, released its first official estimate for 2022 on Wednesday, indicating there could be a 4.7% bump to benefits starting next January.
More from The New Road to Retirement:
Here's a look at more retirement news.
- Biden tax plan may lead to more Roth retirement accounts
- How to handle Covid-related withdrawals from retirement accounts
- 3% of near-retirees can answer all these Social Security questions
If that estimates holds, that would be the biggest increase retirees and other beneficiaries have seen since 2009, when benefits jumped 5.8%. In 2021, the Social Security cost-of-living adjustment was 1.3%.
The increase is culled from the latest Bureau of Labor Statistics data for the Consumer Price Index for Urban Wage Earners and Clerical Works, or CPI-W. The Social Security Administration uses that index to calculate its cost-of-living adjustment each year.
To be sure, this estimate is preliminary and could change. The actual COLA for next year will be based on data through the third quarter.
The current estimate is based on a 12-month average inflation projection using data through April, according to Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
Much of the data that contributed to the estimate has to do with higher energy and gasoline prices, Johnson said.
Because the data does not include May, it's missing the after effects of a recent cyberattack on a major U.S. fuel pipeline, which has led to a run on gasoline and price spikes in certain parts of the country.
If inflation declines and the estimate stays the same, that will help improve seniors' buying power, Johnson said.
10 fastest growing costs for older Americans
|Item||Cost in 2000||Cost in March 2021||Percent increase|
"A lot will depend on if inflation holds until COLA is announced and then whether inflation starts slowly coming back down again, so that by January of 2022 it's lower than it is today," Johnson said.
The Social Security Administration typically announces next year's adjustment in October.
Consumer price data through May shows that Social Security recipients have lost buying power, according to the Senior Citizens League's research.
If current inflation trends continue, "the loss of buying power could grow deeper in 2021," Johnson said.
Source: Read Full Article