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Coming Out Ahead

Mike Zaccardi, 3:19 am ET

LAST WEEK’S NEWS that Social Security recipients will receive a 5.9% cost-of-living adjustment for 2022 might seem like a nonevent. After all, those larger monthly checks will be fully devoured by today’s higher prices.

Or maybe not.

September’s report for the Consumer Price Index (CPI) showed that inflation for medical care services—a big cost for retirees—was quite tame over the past 12 months, rising less than 1%. Seniors also spend significantly less on transportation, so they’re less harmed by the past year’s 15% surge in the cost of new and used cars and trucks, as well as motor vehicle parts.

On the downside, younger retirees—or, at least, those willing to travel during the pandemic—have likely felt the brunt of the 18% jump in the cost of “lodging away from home.” One plus for travelers: A strong U.S. dollar has made overseas excursions less pricey. Those in their 60s usually travel more, while those ages 75 and up tend to spend a higher amount on health care.

Next year may be kinder to all consumers. According to Bank of America analysts, core CPI—which excludes volatile food and energy items—will rise 4.3% in 2021 and 3.1% in 2022. The Federal Reserve, which looks at a somewhat different inflation measure, expects core inflation to be even lower.

What does all this mean? Arguably, those receiving Social Security checks are getting a pretty good deal. They’re receiving a 5.9% raise, while their cost of living appears to be climbing at a slower rate.

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Randy Dobkin
Randy Dobkin
8 months ago

The COLA should be based on inflation measures more relevant to retirees.

R Quinn
R Quinn
8 months ago
Reply to  Randy Dobkin

Be careful what you ask for. The CPI-E is often cited but it rarely is more than .1 or .2% different than CPI-W and in some years it’s less.

Last edited 8 months ago by R Quinn
Ormode
Ormode
8 months ago

SS is nice, but most upper-middle-class retirees have other sources of income, and may get the bulk of their income from these. If they don’t increase as well, a 5.9% increase in SS will still not put you ahead. Pensions are often fixed, and the stock market may or may not continue to perform.

R Quinn
R Quinn
8 months ago
Reply to  Ormode

Not sure how we define upper middle class, but reportedly only 7% of retirees pay IRMAA premiums so that implies the vast majority are not upper middle class. Obviously the smaller percentage of total income provided by SS the less the overall COLA impact, but SS is still a significant portion of income for most retirees, especially widows.

parkslope
parkslope
8 months ago

SS increases are designed to catch up with inflation, not to anticipate it.

polamalu2009
polamalu2009
8 months ago

Mr. Quinn I could not agree more. My dear dad would stand up during senior group meetings and basically say that retirees were beggaring their children and grandchildren by increasing demands on SS and Medicare. He wasn’t real popular. Scott Burns wrote a wonderful book entitled “The Coming Generational Storm” whose basic tenet was that we could not do enough for our children compared to the burdens they would face financially being taxed during their working lives to pay for our (Baby Boomer) generation’s entitlements.

R Quinn
R Quinn
8 months ago

As a 78-year old retiree getting that 5.9% I agree with you, but I would not stand up at a AARP meeting and say it.

Many retirees think it’s too low, that they were entitled to much more in the past. A new bill is about to be introduced to guarantee a minimum % increase regardless of actual inflation. I read one discussion saying retirees deserved a 20% raise.

It’s a strange world of entitlement when one hits 65. It’s like even after 40 years of working it’s a surprise you need more than SS to live on in old age. Most troublesome is the willingness for many seniors to keep demanding and taking with little regard to the eventual impact on their children and grandchildren or for that matter young families struggling in the moment.

But don’t overgeneralize health care costs. My Part D premiums are going up 20% in 2022 and deductible going from $150 to $400. No word on the Medigap premiums yet, but many have seen double digit increases. For lower income retirees those increases plus $10 more from Medicare can wipe out even 5.9% of their benefit.

mytimetotravel
mytimetotravel
8 months ago
Reply to  R Quinn

Have you compared drug plans on medicare.gov yet? You should do that every year, and even without setting up an account you can input your actual medications to get a good comparison. (I don’t know why you would not set up an account, they already have all your data.)

IAD
IAD
8 months ago

I would never plan on anything the Federal Reserve or big banks say. They are selling this crap to keep the peasants docile.

Mike Zaccardi
Mike Zaccardi
8 months ago
Reply to  IAD

We can use the Treasury markets to figure out what the sum of the crowd believes. We’re at roughly 2.9% inflation going out two years.

Update: 2.94% going out five years!

Last edited 8 months ago by Mike Zaccardi

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