Social Security Payouts Could See a Significant Hike Next Year as Well
According to one retirement expert, if inflation continues to rise at its current rate, another big boost in Social Security benefits could be on the horizon next year.
The Boston College Research Fellow Matt Rutledge recently stated on Yahoo Finance Live that “there is a possibility that we might actually see another fairly large COLA adjustment next year” (video above).
After nearly four decades, the Social Security Administration has stated that the cost-of-living adjustment would increase by 5.9 percent in 2022, which will be the greatest increase in nearly four decades.
It was pointed out by Rutledge that the increase was computed based on inflation rates from October 2020 to October 2021, and that November’s year-over-year inflation rate was even higher at 6.8 percent, suggesting that the economy will see another significant increase in 2019.
According to him, “it really depends on so much of what’s going on and so many of the things we’ve been looking at in terms of whether or not this inflation is going to be transitory or not, whether or not the ports are still going to be backed up, whether or not we’re still going to be experiencing labor shortages.”
“The good news, I believe, is that Social Security beneficiaries will be safeguarded against the majority of inflation that they would otherwise suffer,” Rutledge continued.
What is still up in the air is how many future beneficiaries would receive from Social Security if the existing surplus in the trust fund that pays out benefits runs out in 2034, as is currently forecast. At that moment, the fund was only able to cover 78 percent of the total amount of benefits.
As a result, “a lot of household portfolios for folks who rely on that Social Security payment would be devastated,” according to Rutledge.
In the United States, approximately half of seniors rely on Social Security for at least half of their entire income. Rutledge stated that this demonstrates how important the program is to retirees.
“Social Security is really necessary to protect,” he added, noting that future retirees will have to rely more on other sources of income, such as employer-sponsored 401(k) plans, their personal savings, and house equity to supplement their income. “In general, you need to take an all-of-the-above approach,” says the author.
What strikes Rutledge is that there has been little political discussion on the future of Social Security, despite the fact that seniors constitute a significant and loyal voting bloc.
“We haven’t heard a peep during any of the last few election cycles,” said Rutledge, who added that legislators might take restorative acts to strengthen up Social Security, such as increasing taxes on wealthier earnings and extending the retirement age beyond 67 years old, to do so.
In a way, it’s almost as if there is bipartisan support, but it’s nonpartisan support for completely avoiding the problem.