Despite High Inflation Rates, Social Security Benefit Gets Biggest Boost in 40 Years
The Social Security Administration (SSA) recently announced that Social Security checks will increase next year at the greatest rate in nearly 40 years.
This increase, however, probably won’t be enough because of rising inflation.
About 8 million Americans receiving Supplemental Security Income (SSI) benefits will see a 5.9% hike at the end of December, while another 64 million will see a COLA increase at a similar rate by the beginning of 2022.
According to the Bureau of Labor Statistics (BLS), the Consumer Price Index of CPI-based inflation measures is used to calculate the COLA.
However, the BLS’s latest data shows that the CPI rose by 6.2% in October, which was the biggest increase since November 1990.
If the 31-year high holds, Social Security benefits will not be able to keep up with inflation by the end of the year.
Increases in the Consumer Price Index may be too little, too late.
Activists for Senior citizens’ groups say relying on a COLA increase in the past has been damaging to Social Security beneficiaries, as benefits aren’t increased enough on average every year.
“While the high COLA is welcome, Social Security recipients are saying that years of low COLAs in the past made it next to impossible to cope with the rampant inflation of 2021 because COLAs haven’t kept pace with some of the fastest-growing costs of older households,” the Senior Citizens League (TSCL) said in a statement.
In October, inflation rose 6.2%, which means even the new benefit amount for this year may not cover increases in prices that SSI recipients face.
“COLAs are intended to protect the buying power of Social Security benefits but, according to consumer price data through July of 2021, Social Security benefits have lost nearly one-third of their buying power, 32%, since 2000, about the length of a typical retirement,” Mary Johnson, TSCL Social Security and Medicare policy analyst, said.
“Even worse, it appears that inflation is not done with us yet, and the buying power of Social Security benefits may continue to erode into 2022.”
Housing and health care costs are driving Social Security recipients into poverty.
And according to advocates, COLA isn’t the ideal measure for estimating seniors’ costs, since it does not account for several major expenses.
“Over the past 21 years, COLAs have raised Social Security benefits by 55% but housing costs rose nearly 118% and healthcare costs rose 145% over the same period,” Johnson explained.
“These two categories, in particular, are not adequately accounted for in the COLA.”