Social Security Beneficiaries Could Experience the Largest Cost-of-living Increase in Forty Years.

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As inflation rapidly erodes retired Americans’ purchasing power, Social Security recipients are set to receive the largest cost-of-living increase in over four decades.

Based on April inflation data, which showed that consumer prices rose 8.3 percent from the previous year, close to a 40-year high, the Senior Citizens League, a nonpartisan group that focuses on issues affecting older Americans, estimated on Wednesday that the adjustment could be as high as 8.6 percent in 2023.

 

SOCIAL SECURITY

 

IN APRIL, INFLATION REACHED A 40-YEAR HIGH OF 8.3 PERCENTAGE.

The annual Social Security change is calculated using the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, which increased 9.4 percent in the previous year.

If Social Security recipients receive an 8.6 percent increase in their monthly checks next year, it will be the steepest annual adjustment since 1981, when recipients received an 11.2 percent increase. The Senior Citizens League previously predicted that the COLA for 2023 would be 8.9 percent, but headline inflation has since fallen slightly.

 

In October, the Social Security Administration will publish the final adjustment percentage.

The estimate is still subject to change, and it ultimately depends on whether inflation has peaked or will continue to rise. While economists pointed to Wednesday’s figure as evidence that inflation may be slowing, they also pointed out that prices rose more than expected and remain near a record high, implying that any decline will be painfully slow.

Excluding gas and food, which are more volatile measures, so-called core inflation increased in April more than it did the previous month, alarming some experts who called it a concerning development.

“One does not get the impression that this will provide any relief to households experiencing a loss in purchasing power or to policymakers attempting to restore price stability without causing a recession,” said RSM chief economist Joe Brusuelas.

According to the Social Security Administration, the average Social Security benefit in 2022 increased by 5.9 percent, amounting to a monthly increase of $92 for the average retired American, bringing the total amount to $1,657. However, the Senior Citizens League estimates that rising inflation has already eroded the entire increase.

According to new research from the Senior Citizens League, Social Security recipients have lost 40% of their purchasing power since 2000.

“That is the greatest loss in purchasing power since the beginning of this study in 2010,” said Mary Johnson, the Senior Citizens League’s policy analyst who conducted the research.

Although Social Security benefits have increased by 64% since 2000 due to cost-of-living adjustments, typical senior expenses have increased by 130 percent through March 2022. To maintain the same purchasing power as 22 years ago, Social Security would need to be increased by $539.80 per month.

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The Senior Citizens League has urged Congress to pass legislation that would index the adjustment to inflation for seniors specifically, such as the Consumer Price Index for the Elderly, or CPI-E. This index focuses on the spending habits of households with people aged 62 and up.

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