TSCL is forecasting a 1.3% Social Security cost-of-living adjustment (COLA) for 2021. Our forecast is based on the most recent consumer price data from the U.S. Bureau of Labor Statistics (through August) and uses the same formula that the Social Security Administration uses to calculate the annual inflation boost.
If our forecast proves correct, this would be the second lowest COLA ever paid.
It would be 5th time in only 11 years that there has been an extremely low, or even annual inflation adjustment. This is more evidence that the current inflation measurement and benefit indexing system is broken, and not working for U.S. retirees.
The COLA was zero in 2010, 2011, and 2016. It was just 0.3% in 2017. Since 2010, annual COLAs have averaged just 1.4%. That’s less than half the 3% that COLAs averaged between 1999 and 2009. This has occurred at the same time that other costs experienced by retirees, particularly for healthcare and housing, have grown several times faster than the overall rate of inflation, but those costs have not been accurately reflected in the COLA.
The Social Security COLA is intended to protect the buying power of benefits from eroding when prices go up. When the annual inflation adjustment doesn’t rise in sync with rising costs, the buying power of benefits erode. That chips away at the standard-of-living of all COLA recipients. TSCL has heard from retirees who were forced to spend through savings more quickly than planned, or to look for work again after starting benefits, even when well over the age of 70. We know that, because of a decline in the buying power of their benefits, too many retirees are at risk of sliding into debt and poverty.
Questions about the fairness and accuracy of the COLA, which TSCL’s research, surveys, and supporters have raised, are getting attention in the media and reaching Capitol Hill. Recently the U.S. Government Accountability Office (GAO) was asked to review efforts to measure the cost of living for older populations. In its report, the GAO found that “the U.S. Bureau of Labor Statistics (BLS) faces accuracy, timeliness, and relevancy challenges developing consumer price indexes (CPI) for subpopulations of blue-collar workers and older Americans.” The GAO went on to say, “BLS has not evaluated the extent to which its existing data are adequate to produce CPIs that reflect what these subpopulations pay, where they shop, and what they purchase…Without an evaluation, federal retirement benefits could be subject to adjustment based on potentially inaccurate information.”
TSCL has been working to ensure that Members of Congress are made aware that there could be an extremely COLA in 2021 and that corrective action will be needed. TSCL is proposing a 2.5% emergency COLA and making the case for why an actual benefit boost is needed now — not just a stimulus check. The Social Security COLA will be announced October 13, 2020.
Source: “Retirement Security: BLS Should Explore Ways to Improve the Accuracy, Timeliness, and Relevance of its Cost of Living Measurements,” Report to Congressional Requesters, U.S. Government Accountability Office, June 2020, GAO-20-422.