Aging Americans receiving Social Security benefits may be in for a lower cost-of-living adjustment next year, according to new data from the government. The estimate from The Senior Citizens League indicates that the adjustment may be around 3.1%, which is a significant drop from the 8.7% increase beneficiaries saw this year.
This estimate follows new consumer price index data that shows inflation has risen 4.9% over the past year as of April, with a 0.4% rise for the month. However, the subset of data used to calculate the annual Social Security cost-of-living adjustments has only risen 4.6% over the past 12 months and 0.6% for the month based on the April data.
It is important to note that the 3.1% estimate is preliminary and may change, says Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League. The Social Security Administration calculates the annual cost-of-living adjustment based on third-quarter CPI-W data for July, August, and September, based on percentage increase for the third quarter from one year to the next. If there is no increase, the adjustment is zero.
The report from The Senior Citizens League also evaluated how well Social Security benefits have kept up with rising costs and found they have fallen short.
Since 2000, benefits have lost 36% of their buying power, according to The Senior Citizens League’s calculations. Today’s retirees would need an extra $516.70 per month to be able to live as well on Social Security benefits as beneficiaries did in 2000.
Furthermore, a record-high cost-of-living adjustment may not necessarily benefit older Americans in the long run. Bank of America Institute’s research suggests that the extra money estimated to be more than $140 per month may prompt higher levels of spending among older Americans, which could complicate the fight against higher inflation.
While higher spending may bring delayed relief for older Americans, it is a difficult living situation for the average retiree with the high rates of inflation.
To sum up, inflation is cooling, which may result in a lower Social Security cost-of-living adjustment next year. The new estimate is around 3.1%, according to The Senior Citizens League, which is a significant drop from the 8.7% increase seen this year.
However, this estimate is subject to change. Additionally, Social Security benefits have fallen short of keeping up with the rising costs, with a 36% loss in buying power since 2000. Despite the potential record-high cost-of-living adjustment, older Americans may not benefit in the long run, as the extra money may prompt higher levels of spending and complicate the fight against higher inflation.