Social Security Benefits Could Get Their Biggest Boost in 40 Years.

[Jerry1]

COLA increases do not apply until you are 62.

I will be 62 in January.

However, that seems like it wouldn’t apply to SS disability. What if you became disabled at 50? You wouldn’t get an update for 12 years?

 

[Sarah S]

I know people getting ssdi get increases and I believe it is the same cola as regular ss. Whether there is some snag because you haven’t started yet I am not sure

 

[Music Lover]

The news I read about the 8.7% increase said, "The adjustment represents the largest one-time increase since 1981, and the largest experienced by beneficiaries alive today."

So, I was wondering, just how does this compare to 1981? In 1981, the increase was 11.2%. Hmmm, todays increase is about 78% of that in 1981. That gives us some reference.

I thought they changed the math on how inflation was calculated. So today's 8.7% using 1981 methods would really be a lot higher.

 

[intent]

As someone who is at least 7 years from taking SS (maybe more depending on how long I wait to take it), am I correct to think today's increases are raising my expected payout down the road? IOW, can I expect my payout to increase because it will be compounded on today's COLA increases.

Not sure if I'm writing that in a way that makes sense. If no one can decipher my intended meaning I'll take that as an indication I should make another pot of coffee - and maybe add extra sugar

 

[ShokWaveRider]

SSA.gov says, balance not available (for me). I applied for my SS last week but still in progress. Can they be updating it this fast?

 

[MissMolly]

Well, apparently SSDI recipients also get the COLA.

 

[MRG]

I will be 62 in January.



However, that seems like it wouldn’t apply to SS disability. What if you became disabled at 50? You wouldn’t get an update for 12 years?

No. You get COLA increases on SSDI. I don't know about your other question if/when that's applied in the case you cited.

 

[Trailwalker]

A consolation prize for those turning 62 in 2023 and missed out on this COLA, the AWI for 2021 has been published at $60,575, increase of 8.89% over 2020, which is 3% better than estimates. To be honest, I'm not sure how much that plays in to benefits, but I know it counts for something.

https://www.ssa.gov/oact/cola/AWI.html

That would be me turning 62 next year and mumbling about why it couldn't be a low inflation year. My wife turns 62 in December. Not sure if the glass is half full or we have two empty glasses.

 

[Dtail]

I know people getting ssdi get increases and I believe it is the same cola as regular ss. Whether there is some snag because you haven’t started yet I am not sure

Yes, SSDI increases are the same as COLA increases. My DGF is on SSDI and is under 62.

 

[latexman]

I thought they changed the math on how inflation was calculated. So today's 8.7% using 1981 methods would really be a lot higher.

In God we trust, all others must bring data.

 

[jldavid47]

I thought they changed the math on how inflation was calculated. So today's 8.7% using 1981 methods would really be a lot higher.

Why on earth would they ever use 1981 methods in 2022? What we buy has changed. Cell phones and internet service (for example) were not even in the index back then. Using 1981 methods would exclude them today. Does that make any sense? Why not 1900? Then we could include the changes in the price of buggy whips and horse feed and keep the same weights on them. If inflation would measure higher using 1981 methods all that means is that items that were in the index calculation in 1981 have increased faster than items that have been added since then. So what?

I see this gnashing of teeth over how "they" have changed the calculation over the years all the time (usually in the context of claiming there has been some grand conspiracy to keep the truth away from the people). Of course they have. They have to because what we buy and how much we buy within each category changes over time. It would make no statistical sense to not update methods over time.

 

[Music Lover]

Why on earth would they ever use 1981 methods in 2022? What we buy has changed. Cell phones and internet service (for example) were not even in the index back then. Using 1981 methods would exclude them today. Does that make any sense? Why not 1900? Then we could include the changes in the price of buggy whips and horse feed and keep the same weights on them. If inflation would measure higher using 1981 methods all that means is that items that were in the index calculation in 1981 have increased faster than items that have been added since then. So what?

I see this gnashing of teeth over how "they" have changed the calculation over the years all the time (usually in the context of claiming there has been some grand conspiracy to keep the truth away from the people). Of course they have. They have to because what we buy and how much we buy within each category changes over time. It would make no statistical sense to not update methods over time.

There is no need to bring up buggy whips, relax. Of course certain items are no longer used but that wasn't my point, not sure why you would make that ridiculous suggestion?

Perhaps I'm mistaken but I was under the assumption that certain everyday staples that used to be included are no longer included or are weighted differently in a way that may not be realistic. That's all, there is no conspiracy.

 

[jldavid47]

There is no need to bring up buggy whips, relax. Of course certain items are no longer used but that wasn't my point, not sure why you would make that ridiculous suggestion?

Because the suggestion that inflation would be higher using 1981 methods is just as ridiculous. Why would you bring up 1981 except to try to make a point that inflation is underestimated?

 

[38Chevy454]

Because the suggestion that inflation would be higher using 1981 methods is just as ridiculous. Why would you bring up 1981 except to try to make a point that inflation is underestimated?

uhhh, maybe because it is in govt's interest to keep the official number lower?

Doesn't mean you are wrong about changing the things in the calculation to match better; even if those things work out in govt favor. Yes, call me skeptical of govt that consistently lies to the public.

 

[karen1972]

There is no need to bring up buggy whips, relax. Of course certain items are no longer used but that wasn't my point, not sure why you would make that ridiculous suggestion?

Perhaps I'm mistaken but I was under the assumption that certain everyday staples that used to be included are no longer included or are weighted differently in a way that may not be realistic. That's all, there is no conspiracy.

As far as I know two big things changed.

Sometime in the 80's housing was changed from including home ownership costs, mortgage/maintenance to being rent equivalent. Our neighbors rents so I know he increased rents 14% this year; however expenses (as calculated in the 80s) would have only been 4% increase. I'd say housing is currently being overcounted due to the mass rental shortage occurring in many large cities.

Later they changed cost of goods to cost of living, thus allowing for changes in consumer spending based on price, so it is using the substitution method.

So you may disagree with methodology, its been that way for a long time. There is no perfect method, because let's say bacon went up 50% and now no one was eating bacon, would it make sense to use bacon as the standard and just say inflation is 50%. I drink wine sometimes, I drink soda sometimes. Wine is now WAY cheaper than soda so I drink more wine, am I complaining... NOPE.

 

[obsessed]

As someone who is at least 7 years from taking SS (maybe more depending on how long I wait to take it), am I correct to think today's increases are raising my expected payout down the road? IOW, can I expect my payout to increase because it will be compounded on today's COLA increases.

Kind of in an indirect way. Until age 61/62, your historical wages get adjusted based on a wage index. To the extent that inflation drives up wages today's COLA drives up your expected payment. After that your PIA is settled and adjusted by the COLA directly. The transition period around age 61/62 is a little fuzzy.

 

[gauss]

There is no need to bring up buggy whips, relax. Of course certain items are no longer used but that wasn't my point, not sure why you would make that ridiculous suggestion?

Perhaps I'm mistaken but I was under the assumption that certain everyday staples that used to be included are no longer included or are weighted differently in a way that may not be realistic. That's all, there is no conspiracy.

Are you thinking of the Chained-CPI vs traditional CPI? The Chained-CPI generally predicts smaller increases due to consumers tendency to substitute items when prices rise.

The Chained-CPI has not been applied to Social Security (yet), but has been applied since 2018 to the IRS (ie tax bracket growth, standard deduction growth etc.)

-gauss

 

[Jerry1]

Just got the following from SS in an email:

Starting in early December, you will be able to securely view and save your Social Security COLA notice online via the Message Center inside my Social Security.

So my guess is that my first payment being the December payment received in January, it will be what was as provided in my Disability notice. Then after that, my payments will be increased by the COLA. I guess I’ll know more in December.

 

[HawkOwl]

Sycamore on Bogleheads posted a link that neatly summarizes that “fuzzy” area between ages 60-62. Sucks to have been born in 1961.

https://www.helpwithmysocialsecurity.com/post/social-security-colas-for-ages-60-62

 

[SecretlyFI]

Kind of in an indirect way. Until age 61/62, your historical wages get adjusted based on a wage index. To the extent that inflation drives up wages today's COLA drives up your expected payment. After that your PIA is settled and adjusted by the COLA directly. The transition period around age 61/62 is a little fuzzy.

I’m at a similar age, about 7 years from earliest possible claim date. Would the adjustments you describe, to historical wages and resulting expected payment, be reflected in SS calculators? I usually go into them each year around my birthday and check. Wondering if I should be expecting to see different amounts next time as a result of these factors?

 

[David3]

Sycamore on Bogleheads posted a link that neatly summarizes that “fuzzy” area between ages 60-62. Sucks to have been born in 1961.

https://www.helpwithmysocialsecurity.com/post/social-security-colas-for-ages-60-62

The 2021 Average Wage Index jumped 8.9% which should give the 1961 folks a bump in line with the COLA. Data -> https://www.ssa.gov/oact/cola/AWI.html#Series.
Those of us born in 1960 were worried the 2020 AWI would drop due to COVID and permanently reduce our benefits; thankfully this didn't happen.

 

[HawkOwl]

The 2021 Average Wage Index jumped 8.9% which should give the 1961 folks a bump in line with the COLA. Data -> https://www.ssa.gov/oact/cola/AWI.html#Series.
Those of us born in 1960 were worried the 2020 AWI would drop due to COVID and permanently reduce our benefits; thankfully this didn't happen.

As I understand it, the wage index adjustments stop at age 60. The COLA doesn’t kick in until age 62.

If you were born in 1960, you will miss out on last year’s 5.9% COLA. If you were born in 1961, you will miss out on that PLUS this year’s 8.7% COLA.

Neither cadre will make up for it with wage inflation adjustments because there are none after age 60. Those born in 1960 and 1961 are in a null zone and receive neither.



From the linked article:

‘ If you were born in 1960, meaning you turned 62 this year, you didn't get the 5.9% COLA of last year (which was applied for 2022) because you weren't eligible for benefits. Now you're eligible for benefits based on your earnings record, so you will get the upcoming COLA which will be announced in October and applied next year when you're 63. But you missed the 5.9% COLA last year and didn't get the wage inflation adjustment the year before.

If you were born in 1961, you will take the biggest hit because you missed last year's 5.9% and will miss this year's 8.5% (or whatever it's going to be). So you will be missing out on over 13% indefinitely

This 2-year period – where the Social Security setup causes you to receive neither the wage inflation adjustment nor COLA – happens to everybody. It has always gone under the radar. But what brings this reality to people's attention now is that we're seeing inflation not seen in 40 years. ‘

 

[obsessed]

Sycamore on Bogleheads posted a link that neatly summarizes that “fuzzy” area between ages 60-62. Sucks to have been born in 1961.

https://www.helpwithmysocialsecurity.com/post/social-security-colas-for-ages-60-62

Thanks for the link but I’m not sure it’s totally correct as the bend points continue to adjust until age 62 so you get an adjustment but not likely equal to the COLA adjustment (different index, lag time). I was born in 1962 so it’s of particular interest.

Here’s a link to a video I have found informative in building my own calculator in Excel. It didn’t match up perfectly to the SSA number but was very close.

https://youtu.be/im1IYEa_B2o

 

[Time2]

With 9% inflation it seems as though the bucket has a significant leak. In 8 years it will lose half of its value.

The bucket isn't for inflation, the bucket is to weather the stock market down turn. The only way to weather inflation is to build your nest egg back up to its value before inflation, that usually means a j*b.

 

[David3]

As I understand it, the wage index adjustments stop at age 60. The COLA doesn’t kick in until age 62.

If you were born in 1960, you will miss out on last year’s 5.9% COLA. If you were born in 1961, you will miss out on that PLUS this year’s 8.7% COLA.

Neither cadre will make up for it with wage inflation adjustments because there are none after age 60. Those born in 1960 and 1961 are in a null zone and receive neither.



From the linked article:

‘ If you were born in 1960, meaning you turned 62 this year, you didn't get the 5.9% COLA of last year (which was applied for 2022) because you weren't eligible for benefits. Now you're eligible for benefits based on your earnings record, so you will get the upcoming COLA which will be announced in October and applied next year when you're 63. But you missed the 5.9% COLA last year and didn't get the wage inflation adjustment the year before.

If you were born in 1961, you will take the biggest hit because you missed last year's 5.9% and will miss this year's 8.5% (or whatever it's going to be). So you will be missing out on over 13% indefinitely

This 2-year period – where the Social Security setup causes you to receive neither the wage inflation adjustment nor COLA – happens to everybody. It has always gone under the radar. But what brings this reality to people's attention now is that we're seeing inflation not seen in 40 years. ‘

I don’t think it is a 2 year period. There is a grey area since COLA uses Q3 YoY inflation and AWI is based on prior year wages. Using age instead of birth year in the discussion can also cause some confusion. Some 1961 babies are still 60 today while others are less than 3 months from turning 62.

Those born in 1961 will have their base PIA established shortly, based on the 2021 AWI. So they will benefit from the 8.9% AWI increase. Their PIA will not be bumped up again till Jan 2024, so they ‘miss’ the 2023 COLA bump. Those of us born in 1960 got a very small increase in the final AWI, thanks to COVID, and our first COLA will be the one just announced.