The Senior Citizens League is estimating that there will be no Social Security Cost of Living Adjustment for 2021, based on consumer price index (CPI) data through April of this year.
“The recent unprecedented plunge in oil prices have all but wiped out the prospect of a Social Security cost-of-living adjustment (COLA) for next year,” says Mary Johnson, a Social Security policy analyst for the League with an extraordinary track record of accurately predicting the next year’s COLA.
That estimate might change, TSCL said in a recent statement, since there are still five months of consumer price index data to be collected before the Social Security Administration officially announces the 2021 COLA in October.
Back in April, The Kiplinger Letter forecast a 2021 COLA increase below 1%.
Social Security benefits have lost 30% of buying power since 2000, according to the latest Social Security Loss of Buying Power study released in May by TSCL.
“This year’s study found a 3 percentage point gain in the buying power of Social Security benefits over 2019,” Johnson says. “That should indicate that most retirees may have seen at least some prices come down on certain items—such as lower electric bills, as well as lower prices on eggs, fresh fruits, and vegetables. On the other hand, when there are lower prices—this is a signal of deflation—which means a lower cost-of-living adjustment (COLA) is on the way.”
This year’s 1.6% COLA was already low to begin with compared to the 2019 increase of 2.8%. In 2020, the average Social Security benefit is $1,460, up just $23.40 per month over last year thanks to the small COLA increase.
The study, which examined price changes from January of 2019 to January of this year, found that, since 2000, the buying power of Social Security benefits improved 3 percentage points in 2020—from a loss of 33% as of 2019 to 30% in 2020.
“This study illustrates why legislation is needed to provide a more fair and adequate COLA,” Johnson says. “To put it in perspective, for every $100 worth of groceries a retiree could afford in 2000, they can only buy $70 worth today,” Johnson adds.
To help protect the buying power of benefits, TSCL supports legislation that would provide a modest boost in benefits and base COLAs on the Consumer Price Index for the Elderly (CPI-E) or guarantee a COLA no lower than 3%.
A person who retired in 2000 with an average Social Security benefit of $816 per month would have $1,246.20 per month by 2020. However, because retiree costs are rising at a substantially faster pace than the COLA, that individual would require a Social Security benefit of $380.00 more per month, or a total of $1,626.20 in 2020, just to maintain his or her 2000 level of buying power.
Between January of 2000 and January of 2020, Social Security COLAs increased Social Security benefits by 53%, but the costs of goods and services purchased by typical retirees rose almost twice as much—99.3%. Medicare premiums and out-of-pocket costs, housing, and homeowner’s insurance were among the most rapidly rising costs over the past year.
Participants in The Senior Citizens League’s surveys indicate that household medical expenses consume a significant portion of their monthly income. More than 39% of respondents to a recent survey say that they spend more than $750 per month on all Medicare and other healthcare costs.
Veteran financial services industry journalist Brian Anderson joined 401(k) Specialist as Managing Editor in January 2019. He has led editorial content for a variety of well-known properties including Insurance Forums, Life Insurance Selling, National Underwriter Life & Health, and Senior Market Advisor. He has always maintained a focus on providing readers with timely, useful information intended to help them build their business.
