Mary Johnson, editor
Every year, I take a look at how the Social Security cost of living adjustment (COLA) compares with the rise in average retiree costs. Data that I collect for my report on the buying power of Social Security benefits examines the change of prices between January of the previous year to January of the current year. The data I’ve recently collected indicate the 1.6% COLA that you received for 2020 didn’t reflect the economic reality of the average retiree.
Ordinary price changes are no longer measured in the same, straightforward, eighth grade math that you and I use to figure price change. Government economists have changed how they measure inflation many times over the years, using complex formulas and often obscure reasoning. Their explanations are heavy on economic theory and hypothesis, and light on the actual price change experience of people who receive COLAs.
For example, the Social Security COLA is calculated using a consumer price index that measures the inflation experienced by younger working adults. It does not reflect ANY increases in Medicare premiums. Yet two-thirds of Social Security beneficiaries are retired or disabled and covered by Medicare, one of their fastest growing costs. Younger people spend their money differently than retirees and generally don’t have to spend as much on healthcare, which grows several times faster than overall inflation.
For this and a number of other reasons, the COLA shortchanges retirees. If you feel like you’ve been robbed of your rightful COLA, that’s why. COLAs would grow more quickly if actually based on the inflation experience of older consumers. This is also why we need to contact Members of Congress to ensure they fully understand the need for making Social Security COLAs more reflective of the real price inflation experienced by people over the age of 62.
Here’s a list of the ten fastest growing costs from January 2019 to January 2020. from the Bureau of Labor Statistics. However, that was then, and this is now. The price of gasoline has plummeted by 10.2% from a year ago, as of data through March 2020. How does this compare with your experience? Please take TSCL’s Survey of Senior Costs .
Fastest Growing Retiree Costs (January 2019 to January 2020)
|Category||Rate of increase|
|1. Health insurance||20.5%|
|3. Land line telephone service||8.2%|
|5. Fresh milk||6.0%|
|6. Beef roast (uncooked)||5.4%|
|7. Medical care||5.1%|
|7. Repair of household items||5.1%|
|8. Veterinarian services||4.7%|
|9. Hospital inpatient services||4.2%|
Source: Consumer Price Index — January 2020, Bureau of Labor Statistics, February 13, 2020. * Price of gasoline was down 10.2% by March 2020.