65 million Americans who receive Social Security are experiencing an increase. The government announced Wednesday that they are receiving a 5.9% Cost of Living Cost (COLA), the largest increase in four decades. Beginning in January, the average retiree will receive 1, 1,646 per month, an increase of 91 91. Last year’s COLA was 1.3%.
Read: What does increasing COLA mean for your retirement
How heavily millions of seniors depend on social security – and 37% of men and 42% of women depend on 50% or more of their income, and 12% of men and 15% of women depend on 90% or more of their income. – A big monthly check is definitely good news. Not for the good news now.
Read: Social security benefits will jump 5.9% in 2022
It’s important to remember that a COLA is designed to keep you up to date with inflation, and nothing more. If the rate of inflation is X, then you get X. Nothing more. So you’re not moving forward, just a stream of water. The quality of life improves when money enters at a faster rate than inflation. But social security does not work that way.
And when you consider the method of calculating inflation, I would argue that the COLA you are getting is still not enough to hold on.
Here’s why: Social Security’s annual expense-living adjustment is based on a gauge called “CPI-W” – the consumer price index for urban wage earners and clerk workers. This long-named name measures the inflation of working adults under the age of 62, in other words, Americans who are not eligible for Social Security.
What is the problem? CPI-W tends to buy things that seniors tend to buy less যেমন such as electronics and petrol (seniors are probably not coming to work, after all) -but things that seniors spend less on, such as healthcare.
For this reason, critics have long complained that retirees have undergone brief changes over the years and that the measures of inflation that have determined their benefits should be restructured.
“We need to change the formula for calculating COLAs so that beneficiaries accurately measure the growing costs each year,” said Nancy Altman, president of Social Security Works, a Washington-based nonprofit. “We also need to control the cost of healthcare, including the irresistible cost of prescription drugs.”
The rising cost of prescription drugs, and healthcare in general, is an example of why more accurate inflation gauges are needed for social security. Last year, COLA was 1.3%, but the premium for Medicare Part B (which helps cover issues such as physician services, medical supplies and physical therapy) doubled: 2.7%. Since 2000, in fact, Medicare Part B premiums have increased by 226% – more than three times since 2000 but Social Security has increased by only 45% at the same time. Ask any Social Security recipient if they are bearing medical costs and they are likely to put a smile on your face.
The price of everything is rising. The overall consumer price index (CPI), a measure of inflation in the economy, rose 5.3% in the 12 months ending August. Starting with the epidemic, which is disrupting supply chains and creating labor shortages, the drought that is devastating American farmers is putting pressure on prices.
I mentioned above how dependent – in some cases completely dependent – on millions of senior social security. This mobility 2022 will not be made easy with the adjustment cost of living, which, if welcomed, will be gabbled elsewhere.
It’s also important to remember that Americans ’retirement savings in the mid-60s, according to a synchronous bank survey, are $ 172,000. Medium means less than half. In contrast to this 172,000, we can put a lot of big figures against it: $ 300,000. How much does Fidelity Investment estimate that a couple retiring at age 65 this year will have to spend out of pocket for healthcare.
I would like to know something else: this 5.9% COLA will accelerate the withdrawal of Social Security Trust Fund to that degree. Social Security is already paying more than that, and trustees, led by Treasury Secretary Janet Yellen, estimate that the trust fund will be drained by 2034 – after which benefits will be reduced by 22%.
Higher payments can now bring this day of reckoning even closer.