Inflation could prompt largest Social Security cost-of-living adjustment in decades.

[Telly]

Interesting as I thought the AWI increase does not apply to age 61.

It stops at age 60 as you thought. Some years ago I looked into the whole issue, and could not find what, if anything, happens at age 61. It's like a big hole.

 

[Dtail]

It stops at age 60 as you thought. Some years ago I looked into the whole issue, and could not find what, if anything, happens at age 61. It's like a big hole.

Just a guess here.
Since the potential issue with those born in 1960 affects those who will be 61 this year, then logically when it is states that those who are 62 get a COLA increase, so effectively those who are 61 get the AWI adjustment based on year 60 data which doesn't take effect until age 61.
So the data can be confusing, as sometimes it can be the actual age referenced vs. sometimes it can be the calculated age that the data references.

 

[audreyh1]

Just a guess here.
Since the potential issue with those born in 1960 affects those who will be 61 this year, then logically when it is states that those who are 62 get a COLA increase, so effectively those who are 61 get the AWI adjustment based on year 60 data which doesn't take effect until age 61.
So the data can be confusing, as sometimes it can be the actual age referenced vs. sometimes it can be the calculated age that the data references.

OK - answers something I've been wondering about since it was discussed - for a long while!

I turn 62 this year, so this would be the first year of COLA increase instead of AWI for me.

So - I suppose that AWI was applied at the end of last year, in my case, and it would have been the AWI calculated from 2019 since a whole year of data is needed?

Then this year, the COLA for 2022 is not determined until near the end of 2021, but they use the Oct 2020 through Sept 2021 CPI numbers because the COLA is announced in Oct of 2021.

 

[Dtail]

OK - answers something I've been wondering about since it was discussed - for a long while!

I turn 62 this year, so this would be the first year of COLA increase instead of AWI for me.

So - I suppose that AWI was applied at the end of last year, in my case, and it would have been the AWI calculated from 2019 since a whole year of data is needed?

Then this year, the COLA for 2022 is not determined until near the end of 2021, but they use the Oct 2020 through Sept 2021 CPI numbers because the COLA is announced in Oct of 2021.

I agree with your statement.

 

[braumeister]

Then this year, the COLA for 2022 is not determined until near the end of 2021, but they use the Oct 2020 through Sept 2021 CPI numbers because the COLA is announced in Oct of 2021.

Not exactly.
The COLA for next year is based on the difference between the average of the July-September quarter of 2021 compared to the average for the same months of 2020.

Remember that the Federal fiscal year runs from 1 October through 30 September, so it's comparing the last quarter of the year to the prior year.

 

[Dtail]

Not exactly.
The COLA for next year is based on the difference between the average of the July-September quarter of 2021 compared to the average for the same months of 2020.

Remember that the Federal fiscal year runs from 1 October through 30 September, so it's comparing the last quarter of the year to the prior year.

So are you stating that the first 9 months inflation doesn't figure in the calculation?
If that is true, then why would there be comments already that the COLA for next year could be 5% plus based on what has already changed this year?

 

[Elliotgb183]

We’ll never break even, anyway.
Whenever a COLA comes through with SS, Medicare raises their fee and the supplemental insurance coverage goes up.
Vicious cycles are hell.

 

[athena53]

Don't forget if you have a small benefit a big increase could mean you will pay any past Part B increases that may have been deferred.

I know. I've seen so many headlines trumpeting. "Seniors in Line for a Record SS Increase Next Year!!!" They never mention that they'll be offset by Medicare B increases. While I understand that it's very convenient to take Medicare B and Prescription Plans out of SS payments, and it assures that everyone's coverage stays in force, it really muddies the waters. The increase in Medicare premiums isn't any more to blame for the erosion of buying power than any other goods or services, but Medicare gets blamed.

I try to remind people that if their COLA is, say, $50/month and their net SS stays the same because Medicare premiums went up by $75/month, they're getting a $25/month discount in premiums unless they're subject to IRMAA.

They don't like that.

 

[dixter]

The Dems are trying to pass a law so people of 60yrs will be on medicare.. so we may end up getting a break if the SS checks go up maybe the 60 to 65 age group will end up paying medicare and they won't raise the cost as that group of people aren't old enough to use medicare that much as they aren't sick as much as old folgies are...

 

[RetiredHappy]

The Dems are trying to pass a law so people of 60yrs will be on medicare.. so we may end up getting a break if the SS checks go up maybe the 60 to 65 age group will end up paying medicare and they won't raise the cost as that group of people aren't old enough to use medicare that much as they aren't sick as much as old folgies are...

Both points - wishful thinking...

 

[hogwild]

There seems to be some confusion on how the SS COLA is determined. It is quite simple. You take the total of the CPI-W for the months of July, August and September of the current year and divide the total by 3 to get the average for those 3 months. You do the same thing for the same 3 months of the previous year (2020 in this case). The percent change between the two averages gives you the COLA percent.

 

[indiajust]

I would draw a distinction between inflation and monetary destruction. Add in an overlay of supply/demand.

The government cannot afford to pay real interest rates above zero. There is not enough taxes on the planet to pay interest on US debt and deficit. Add in unfunded $200 T entitlement liabilities.

Some combination of higher taxes, lower entitlements, and money creation will be used to fill the gap. The first two require political will to balance spending/taxing. The last happens by default.

The Treasury and the Fed ran this exact same playbook in the 50's. Suppress interest rates and radically increase the money supply.

Last time demand for cars houses energy and gold were where the price rises went. Next time is anyone's guess.

 

[Dtail]

There seems to be some confusion on how the SS COLA is determined. It is quite simple. You take the total of the CPI-W for the months of July, August and September of the current year and divide the total by 3 to get the average for those 3 months. You do the same thing for the same 3 months of the previous year (2020 in this case). The percent change between the two averages gives you the COLA percent.

So then theoretically if the inflation drops tremendously in the next 2 months, the COLA increase for next year could be nothing special?
So a temporary surge of inflation for the first 9 months of any year is conceptually ignored even though it is real for many folks.

 

[Crabby Mike]

So then theoretically if the inflation drops tremendously in the next 2 months, the COLA increase for next year could be nothing special?

So a temporary surge of inflation for the first 9 months of any year is conceptually ignored even though it is real for many folks.

No, prices would actually have to drop, not just rise more slowly, for that to happen. The CPI-W for June was already more than 5% above the 3Q 2020 average. If inflation stopped in its tracks for the next 3 months, we'd already have a 5%+ COLA. I assume the higher estimates are based on 3 more months of inflation at recent rates.

 

[Dtail]

No, prices would actually have to drop, not just rise more slowly, for that to happen. The CPI-W for June was already more than 5% above the 3Q 2020 average. If inflation stopped in its tracks for the next 3 months, we'd already have a 5%+ COLA. I assume the higher estimates are based on 3 more months of inflation at recent rates.

Okay makes sense. Thanks.

 

[audreyh1]

I don’t think Medicare premium increases are based on inflation statistics like SS but rather on the actual cost of the program.

 

[hogwild]

No, prices would actually have to drop, not just rise more slowly, for that to happen. The CPI-W for June was already more than 5% above the 3Q 2020 average. If inflation stopped in its tracks for the next 3 months, we'd already have a 5%+ COLA. I assume the higher estimates are based on 3 more months of inflation at recent rates.

June has nothing to do with the SS COLA. The SS COLA is calculated on the July, August, and September CPI-W. What happens during the other 9 months of the year does not figure into the calculation. The June CPI certainly could be somewhat of a predictor for the following months, but it is not used in determining the SS COLA which will be announced on Oct 13 because that is when the third piece (the September CPI) is published.

 

[Dtail]

June has nothing to do with the SS COLA. The SS COLA is calculated on the July, August, and September CPI-W. What happens during the other 9 months of the year does not figure into the calculation. The June CPI certainly could be somewhat of a predictor for the following months, but it is not used in determining the SS COLA which will be announced on Oct 13 because that is when the third piece (the September CPI) is published.

Umm read Crabby Mike's response again. He realizes what you are saying.

 

[hogwild]

I agree if inflation stays at 5% for July, August and September that the SS COLA will be 5%. But it would be because of the inflation in those 3 months and has nothing to do with June.

 

[Dtail]

I agree if inflation stays at 5% for July, August and September that the SS COLA will be 5%. But it would be because of the inflation in those 3 months and has nothing to do with June.

Agree and my interpretation is that Crabby Mike understands that statement.

 

[Gumby]

I wouldn't be so excited about high inflation. While your social security may or may not keep up with it, if any of your cash flow comes from non-cola pensions or from draws on a high fixed income portfolio, you will almost certainly fall behind.

 

[Dtail]

I wouldn't be so excited about high inflation. While your social security may or may not keep up with it, if any of your cash flow comes from non-cola pensions or from draws on a high fixed income portfolio, you will almost certainly fall behind.

Well wouldn't it work better if rates were raised in an inflationary concept too?
I realize with the govt's large debt, it doesn't seem likely to have interest rates anywhere near the 70's level, where you could lock in a long dated investment with a 10% plus rate which lasted much longer than the high inflation rates.

 

[MichaelB]

Well wouldn't it work better if rates were raised in an inflationary concept too?

That would probably be counterproductive, lead to economic slowdown or even recession, and ironically make the real debt level even higher and more difficult to service.

While many economic numbers look promising, the % of the US population working is below its peak (65% in 2000) and also below it's pre-pandemic high (61% in 01/20). Right now it’s around 57.5%, or around 10 million people still not working. For the US to be “back on track” we need many more jobs, and raising interest rates would nip that in the bud.

 

[Dtail]

That would probably be counterproductive, lead to economic slowdown or even recession, and ironically make the real debt level even higher and more difficult to service.

While many economic numbers look promising, the % of the US population working is below its peak (65% in 2000) and also below it's pre-pandemic high (61% in 01/20). Right now it’s around 57.5%, or around 10 million peoples till not working. For the US to be “back on track” we need many more jobs, and raising interest rates would nip that in the bud.

Fair enough, but over time as folks tend to wish to be a little more conservative in investments as they go deeper into retirement, doesn't this then encourage keeping higher levels in stocks just to keep up with inflation?
Obviously, I am not speaking about those with high levels of investments and low levels of spending.

 

[Bongleur]

Any news on how that would push forward the SS insolvency date & by how much they would have to reduce SS, and what year? Want to plug that into the Open Social Security calculator.