Social Security payments could rise 6.1 percent next year due to soaring inflation, which would be the largest increase since 1983, according to a new estimate, but it may not arrive soon enough for some.
The Senior Citizens League, a non-partisan advocacy group, released the new estimate Wednesday, responding to the latest inflation data showing prices are up 5.4 percent in the 12 months through June.
But for the 69 million people currently receiving benefits, the next cost-of-living increase will not come until January, leaving many struggling on a fixed income as the prices surge.
The most recent bump in benefits, calculated based on last year’s prices, was a mere 1.3 percent.
Social Security payments could rise 6.1 percent next year due to soaring inflation, which would be the largest increase since 1983, according to a new estimate (stock image)
The Social Security Administration calculates its annual cost-of-living adjustment (COLA) based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. The purpose of the annual increase is to ensure that the purchasing power of Social Security and SSI benefits is not eroded by inflation.
In recent months, inflation has risen at an alarming rate, but Federal Reserve Chairman Jerome Powell continues to insist that there will be no imminent change in the Fed’s ultra-low interest rates or massive bond purchases.
The Fed chairman on Wednesday reiterated his long-held view that high inflation readings over the past several months have been driven largely by temporary factors, notably supply shortages and rising consumer demand as pandemic-related business restrictions are lifted.
However, many Republicans in Congress said the federal government’s free-spending policies are to blame, and predict further inflation if President Biden secures his record-breaking $6 trillion budget.
On Tuesday, the government said that prices paid by U.S. consumers had risen 5.4 percent in the 12 months through June, the fastest increase in 13 years.
The consumer price index has risen 5.4 percent in the 12 months through June, the Labor Department said on Tuesday, which is the highest since August 2008
It was the third straight month that consumer inflation has jumped. Excluding volatile food and energy costs, so-called core inflation rose 4.5 percent in June, the fastest pace since November 1991.
In the late 1970s and early 1980s in the US, inflation was so out of control at an annual rate of 14.8 percent that the Federal Reserve, which was chaired at the time by Paul Volcker, had to step in and raise the country’s key interest rate sharply.
The so-called ‘Fed Funds’ rate is essentially the rate at which banks can borrow from each other – and it affects everything from car loans to home mortgages.
The jump in prices stems in many cases from a shortage of components and goods throughout the economy, from semiconductors to used cars, as well as surging demand from consumers who are increasingly traveling, shopping and eating out – and too few workers to serve them.
Wages have increased sharply as a result, along with restaurant meals, airline fares and hotel rates.
Excluding volatile food and energy prices, the so-called core CPI surged 4.5 percent on a year-on-year basis, the largest increase since November 1991, after rising 3.8 percent in May
The CPI increased 0.9 percent last month after advancing 0.6 percent in May, according to the Labor Department
Last month alone, average used car prices soared 10.5 percent – the largest such monthly increase since record-keeping began in January 1953. That spike accounted for about one-third of the monthly increase for the third straight month.
Hotel room prices soared 7 percent in June and the cost of new cars leapt 2 percent, the biggest monthly increase since May 1981. Auto prices have soared because the shortage of semiconductors has forced car makers to scale back production.
Restaurant prices rose 0.7 percent in June and 4.2 percent in the past year, a sign that many companies are raising prices to offset higher labor costs.
So far, investors have largely accepted the Fed’s belief that higher inflation will be short-lived, with bond yields signaling that inflation concerns on Wall Street are fading.
Bond investors now expect inflation to average 2.4 percent over the next five years, down from 2.7 percent in mid-May.