July 12th 2024.
It seems that while inflation rates are on a downward trend, the cost of living for those receiving Social Security benefits is still on the rise. This is according to a recent report from the Senior Citizens League, which found that almost half of Social Security recipients rely on their monthly checks to make ends meet. Alex Moore, a statistician for the Senior Citizens League, explains that for about 50% of senior households, Social Security is the only thing preventing them from falling into poverty.
The Social Security Administration's 2021 report revealed some concerning statistics about the demographics of those who rely on these benefits. It shows that 33% of Black and Hispanic individuals over the age of 62 are dependent on Social Security, compared to only 16% of their white counterparts. This is likely due to a lack of other sources of income during retirement, as well as the added responsibility of caring for others in their household. For these individuals, the need for Social Security is even more crucial.
Living on a fixed income can be extremely challenging, as every penny counts. In fact, a recent survey from the Senior Citizens League found that 34% of retirees have had to turn to food pantries or apply for food stamps in the last year. And unfortunately, this situation is not likely to improve anytime soon, as the forecast for the Social Security cost-of-living adjustment (COLA) is not significant. While a 2.63% increase is expected in 2025, it is only slightly higher than the 2.57% forecasted in June.
The calculation for the COLA is based on the average inflation rate during the third quarter of the year, which includes July, August, and September. Surprisingly, it uses a subset of the Consumer Price Index (CPI) called the CPI for Urban Wage Earners and Clerical Workers, rather than the more well-known CPI-U. This information comes from the financial website Motley Fool.
In June, the forecast for the COLA in 2025 was 3%, but it has since been revised to 2.7% due to lower-than-expected inflation rates. This is a significant drop from the 8.7% increase that was calculated for 2023. It's clear that the COLA may not accurately reflect the rising cost of living, and it's important to note that prices can surge at any time of the year. The official forecast for the next year's COLA is usually announced in October.
The COVID-19 pandemic has had a major impact on the economy, and this is reflected in the significant increase of the CPI-W (which is used to calculate the COLA) from January 2020 to December 2023. However, the COLA has only risen by 19% during that same time period. This means that Social Security recipients may start to fall behind the overall pace of inflation.
As inflation continues to rise, it's important for workers to see an increase in their pay to keep up with the cost of living. This is something to keep in mind as we navigate the effects of the pandemic on our economy.
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