Should Social Security COLA be set at a guaranteed minimum?
"Inflation has exploded," says Senior Citizens League Social Security expert Mary Johnson, bumping up the costs of many items on retirees' shopping lists.
More than six in 10 retirees believe Social Security cost of living adjustments (COLAs) need a guaranteed minimum, according to a new survey by the Senior Citizens League.
The annual COLA in January raised Social Security benefits by only 1.3 percent, making it one of the lowest ever paid. But since then, “inflation has exploded,” said Mary Johnson, a Social Security policy analyst for The Senior Citizens League.
The survey, which had 1,125 participants, was conducted from mid-January through April 20 and coincided with one of the largest increases in inflation in a decade.
Through the end of December, inflation was just 1.4 percent for the year, but by the end of March it was more than 3 percent higher than at the same time last year. “This is an inflation pattern I haven’t seen before,” Johnson said.
Inflation had flatlined in the first quarter of last year, which included January and February, well before COVID-19 shuttered businesses and sent the economy into a sudden tailspin in mid-March. But by the end of first quarter of 2021, inflation erupted, growing by 1.4 percent vs. zero over first quarter of 2020.
The last time inflation was growing that fast was nine years ago in 2012. However, that year was preceded by another year of higher inflation instead of the deflation in 2020.
“When the prices on the goods and services that retirees depend on go through the roof, their Social Security benefits don’t buy as much, and that causes enormous financial stress for all retirees,” Johnson said.
She compiled a list of the items whose costs are among the fastest growing.
“Newly immunized grandparents will need to budget about 31 percent more for car rentals when visiting the grandkids,” she said. “And I’m putting off replacing a failing washing machine. I don’t want to pay 24 percent more to get a new one now.”
Prescription drugs and medical expenses are not on the list. “This is not because those costs didn’t increase,” Johnson said. “They just didn’t increase as much as the other items that made the list.”
Physician services were up 5.3 percent, but prescription drugs were down 2.3 percent from March 2020. Housing costs grew slightly faster than the COLA, up by 2 percent.
The fastest-growing retiree expenses from March 2020 to March 2021 include;
- Car and truck rental, 31 percent
- Laundry equipment, 24 percent
- Gasoline, 22 percent
- Home heating oil, 20 percent
- Beef roasts, 11 percent
- Pork roasts and chops, 11 percent
- Citrus, 10 percent
- Used cars and trucks, 9 percent
- Toilet paper and paper towels, 8 percent
- Apples, 7 percent
- Canned tuna, 7 percent
- Haircuts, 6 percent
- In-home care, 6 percent
The Senior Citizens League is working with Congress to have legislation introduced that would strengthen Social Security benefits by tying the annual COLA to the Consumer Price Index for the Elderly and by providing a guaranteed minimum COLA of no less than 3 percent.
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