Social Security Retirees Will Get a Raise After All, But Don't Get Too Excited
Social Security is supposed to be an inflation-protected source of retirement income because seniors receive periodic cost-of-living adjustments. Unfortunately, the method used to determine if benefits go up is an imperfect one, as it relies on price changes reflected on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Since senior spending habits tend to differ from urban wage earners, benefits haven't been going up fast enough and have lost substantial buying power.
Because of that, it was especially concerning when it appeared seniors might see no Cost of Living Adjustment (COLA) in 2021 due to coronavirus. See, the Social Security Administration considers only the months in the third quarter of the year when determining year-over-year price changes. With coronavirus having a deflationary effect, it looked at first glance as though prices would either fall or remain stable during the critical quarter, so no raise would occur in 2021.
The good news is, this didn't happen. July and August saw rising prices, and while we don't have September's data yet, seniors are likely on track to get a COLA of around 1.2% to 1.4% next year. The bad news is, while this is better than no raise at all, it's not something to get excited about.
Source Fool.com
