Inflation could send Social Security soaring
Steeper prices for gas, food, cars and countless other things are squeezing Americans, especially older ones with fixed, often modest incomes.
The league says seniors have been skipping meals and doses of essential medication.
Consumer prices spiked this summer at rates not seen since 2008. But as inflation rises, so will Social Security benefits.
Advocates predict next year’s cost of living adjustment, or COLA, could be as high as 6.2% — the largest boost in nearly four decades. For the average retiree who got a monthly check of approximately $1,543 this year, a 6.2% rise would increase that payment by $96, to $1,639, in 2022.
For 55 million retirees, that would mean bigger benefit checks every month.
Why is that a bad thing?
The bigger checks going forward may be too little, too late. Higher prices have been savaging seniors’ bank accounts for a while, the league says, and last year’s bump only amounted to an extra $20 a month for the average recipient.
Many seniors are now deep in debt, and a boost matching the rate of inflation next year will only maintain the status quo.
Cost-of-living adjustments also do a poor job of keeping pace with health care hikes and federal taxes, notes a recent report from the Center for Retirement Research at Boston College.
Medicare part B premiums, which are deducted automatically from Social Security benefits, have risen twice as fast as the COLA over the past 20 years. And the threshold at which Social Security benefits get taxed — $25,000 for single taxpayers — isn’t regularly adjusted, meaning more and more recipients are getting taxed over time.
“When the taxation of benefits was first introduced in 1983, only 8% of eligible families paid taxes on their benefits. Today, the estimate is that 56% of beneficiary families pay taxes on their benefits,” the researchers say.
Lastly, some low-income seniors are worried that a boost to their taxable income could affect their access to food benefits, rental subsidies and other forms of support. A stimulus check would be one way to feed them consequence-free cash.
Seniors worry most about the cost of food
In particular, the league says, seniors have identified food as their fastest-growing expense.
Since the beginning of the year, nearly one in five seniors have visited a food pantry or applied for the Supplemental Nutrition Assistance Program (SNAP), formerly known as food stamps, the league reported last month.
“It’s highly disturbing that such a large number of survey participants have been forced to access food pantries,” says Mary Johnson, Social Security policy analyst for the Senior Citizens League. “Over the past 12 months, the price of bacon is up 11%, beef up 10.6 % and fresh fish up 8.5%.”
As a result, one in four seniors have reported going without meat, poultry, fish and dairy.
Survey participants added their next-biggest financial concerns were housing and medical bills.
At least for now, the Senior Citizens League argues, a $1,400 check would keep people from skipping meals just to afford necessities like home insurance.
What to do while you wait on Washington
While the seniors’ advocacy group boasts more than a million supporters, the petition for a $1,400 stimulus check may go unheeded.
A different petition for a fourth round of stimulus checks has nearly three million signatures; Congress and the White House have yet to budge.
For now, here are some actions you can take on your own to protect your wallet.
Deal with your debt. Credit cards have helped many households get through the last year, but the expensive interest will only make life harder going forward. Folding your balances into a single debt consolidation loan can cut the cost of your debt and help you pay it off faster.
Never overpay while shopping online. How do you know whether you’re getting the best deal when there’s thousands of stores online? Save yourself the trouble of comparing prices by downloading a free browser extension that will automatically scour for lower prices and coupons.
Reduce your housing costs with a refi. Still paying down your home loan? With 30-year mortgage rates comfortably below 3%, you could be missing out on significant savings if you haven't refinanced recently. Nearly half the homeowners who refinanced over the last year are saving $300 or more per month, according to a recent Zillow survey.
Turn your small change into a diverse portfolio. Even if you don't have much money, you can still earn returns from today’s red-hot stock market. A popular app can help you invest your "spare change" from everyday purchases.