COLA for Social Security recipients is back or will be in 2020! The Cost-of-living adjustment or better known as COLA will be a 1.6% increase for 68 million Americans who currently rely on Social Security, it was announce by the Social Security Administration (SSA). On average a retiree who receives a monthly Social Security check of approximately $1460 will get a $23.40 increase in their checks per month.
Mary Johnson, who is a policy consultant with the Senior Citizens League, an advocacy group, says that the measure of inflation used to calculate benefits does not accurately show the spending patterns of seniors and when cost of living increases they dip into their savings and when they use up their savings or if they don’t have any then they might have to borrow the money.
According to the AARP, approximately half of seniors depend on Social Security for half of their income but about one fourth of them depend on it for 90% of their income.
This year, disabled retirees, as well as other disabled citizens and young survivors of deceased retirees, received a 2.8% COLA which comes to about a $40.90 extra average increase per month which is the most since 2012.
According to statistics provided by the Senior Citizens League, over the past ten years, COLAs averaged 1.4% less than the 3% average of the decade before.
Johnson says, that seniors who are receiving Social Security benefits tell the Senior Citizens League that their standard of living has declined particularly in the areas of high costs for healthcare and homeowners insurance which have sharply risen over time.
The consumer price index (CPI) which is the measure used by the SSA is the same measure used for urban wage earners and clerical workers, also known as CPI-W, which reflects price increases for gasoline, electronics and other products that make up the larger portion of what younger working citizens spend their money on but not on the rising costs for seniors particularly in healthcare.
Therefore the Senior Citizens League has called for the SSA to use a a proposed index to determine COLA increases based on seniors needs for healthcare cost which has over all risen more sharply compared to inflation. This index would be referred to as CPI-E.
But there are others who prefer using an inflation index called ‘chained CPI’ for seniors receiving Social Security benefits which would have resulted in a lower increase in COLA benefits.
The ‘chained CPI’ strategy they say would help to preserve the Social Security trust fund which analysts say will runout of money by 2035.