The Social Security Administration (SSA) recently announced it is raising Social Security benefits next year, increasing monthly check amounts at the highest rate in nearly 40 years. However, as inflation continues to surge, it may not be enough.
Social Security said a 5.9% increase will take effect at the end of December for about 8 million Americans receiving Supplementary Security Income (SSI) benefits, and in January 2022 for another 64 million Americans due to a cost-of-living adjustment (COLA). COLA is determined using the Consumer Price Index (CPI) inflation measurement tool from the Bureau of Labor Statistics (BLS).
However, the latest data from BLS shows the CPI surged by 6.2% annually in October, the highest inflation increase since November 1990. If this 31-year high persists, the Social Security benefits increase will not be enough to combat the rise in inflation from this year alone.
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COLA increase could be too little, too late
Senior citizen advocates say relying on a COLA increase in previous years has proved to be detrimental to Social Security beneficiaries, saying the average increase of benefits each year has simply not been enough.
"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.
Now, with inflation rising 6.2% annually in October, even this year’s new benefit amount may not be enough to cover the increased prices SSI beneficiaries are facing.
"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."
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Social Security recipients struggling with rising housing and health care costs
Advocates argue that COLA may not be the best measurement for costs incurred by seniors since there are several key expenses not accurately represented in the inflation increases it gives.
"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 said. "These two categories in particular are not adequately accounted for in the COLA."
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