In 2021, Social Security beneficiaries will see an increase in benefits. This is due to the annual cost-of-living adjustment (COLA). The annual COLA is supposed to allow benefits to remain on par with the continual inflation seen throughout the economy.
Unfortunately, the adjustment granted is not enough.
In fact, The Motley Fool notes that Social Security benefits have lost nearly 30% of their buying power in 20 years. This is largely due to the way the annual COLA is calculated.
How is COLA Calculated?
Social Security beneficiaries will see their benefits increase only 1.3% in 2021.
This was determined by following a specific formula. The formula relies on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).
The Problem With Using CPI-W
The CPI-W does not reflect the spending patterns of senior citizens. Rather, according to the Bureau of Labor Statistics, it is based on the spending habits of urban and clerical workers.
Therefore, senior citizens’ finance situations are not correctly accounted for when the annual COLA is calculated. And since 40% of senior citizens rely on their benefits during retirement, the way COLA is calculated seems to be misguided.
Healthcare Costs and COLA
Another problem with the annual COLA calculation is that the increasing healthcare expenses are not factored in.
Healthcare is a necessity, especially for senior citizen. Seniors are more likely to experience health complications that could require extensive care, thereby creating extensive bills.
Furthermore, The Motley Fool notes that the cost of healthcare has continued to outpace inflation. Because of this, senior citizens who do not have access to supplemental income are left in a tight spot.
This is why the Senior Security Alliance is taking action. We are urging the politicians in Washington to pass our bill and grant senior citizens a more financially secure future.
In fact, right number 3 of our bill ensures that any increases in healthcare costs must be included when calculating annual COLA increases for Social Security beneficiaries. Join us by signing our petition.
