In 2021 Social Security benefits increased by just 1.3%, raising the average benefit of $1,550 by about $20, Johnson said. Should the 6.2% stand, the average benefit will be increased by more than $90.
“This is a huge boost that will compound over time,” Jonhson said, noting that retirees are not getting this kind of rate increase from savings vehicles such as bonds and certificate of deposits. “We are all excited to see something like this boost benefits because that is one of the major things that we hear that there needs to be a boost just to help people catch up.”
Living expenses for retirees are outpacing Social Security payouts. According to a recent study by TSCL, consumer price data through March 2021 indicated that Social Security benefits lost 30% of their buying power since 2000, and if the inflationary trends continue, the loss of buying power will probably grow deeper in 2021, Johnson said.
The study found that since 2000, COLAs have increased Social Security benefits from $816 per month to $1,262.40 per month in 2021, a 55% increase, and the typical senior expenses over the same period grew by 101.7%.
As an example, the study looked at a wide sampling of the costs of goods and services that are typically purchased by most Social Security recipients and found that from 2000 to 2021, prescription drug out-of-pocket cost jumped 272% from $1,102 to $4,096; Medicare Part B premiums monthly cost rose 226% from $45.50 to $148.50; homeowner’s insurance rose 178% from $508 to $1,414; home heating oil increased 150% from $1.15 to $2.86; a 10 pound bag of potato increased 134% from $2.98 to $6.98; and a pound of ground chuck increased 127% from $1.90 to $4.31.
Johnson said TSCL members support recent legislation that would tie COLAs to the Consumer Price Index for the Elderly (CPI-E), which measures inflation experienced by older households. The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) index, which is the standard, surveys the spending patterns of younger working adults and is weighted more heavily for gasoline, which is up 41.8% over the past 12 months and drove the steep rise in the COLA. But in 2020 and most of the past 12 years, gasoline prices have been in steep decline, resulting in COLAs averaging just 1.4%, she said.