The Cost of Living Adjustment, also known as COLA, is something seniors throughout America are looking forward to every year. What it means is that data is being collected in order to adjust Social Security based on inflation. At first glance, the program might seem like heaven-sent, especially for those who aren’t doing great in the financial department. If people can rely on an algorithm that’ll put more money in their pockets, that’s great. Right?
Well, it sure sounds like it, but the raise isn’t really substantial. It’s better than no money, at the end of the day, but many seniors can’t help but feel cheated when they look at the numbers. Oftentimes it doesn’t feel like they reflect the reality of our economy at all.
The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) provides the data needed to adjust this sum. In 2020, seniors can expect to see a 1.6% raise. Back in 2019, it was 2.8%. Sadly, a lot of people are even used to this, considering that it’s not much different from the 2012, 2013, and 2014 metrics.
Receiving a raise of 1.6% means $23.50 a month, or $282 per year. It might be enough to cover some minimal expenses but it’s surely not enough for emergencies or more costly purchases.
Why such a low COLA?
COLA wasn’t always this disappointing. The program started in 1970 and between 1975 and 1984 retirees saw boosts of 3.5% or even as much as 14.3%. Even between 1980 and 1990, the average was around 3.5%. So it’s no wonder 2020’s 1.6% isn’t thrilling for a lot of households. Even more, a lot of seniors seemed to have lost faith in COLA.
So we can’t help but ask ourselves what went wrong? What’s the reason behind such a tiny sum?
Well, the big issue with COLA is where it gets its data from and the fact that there are no other available options as of right now. Seniors and younger people have different needs that need to be taken into account, such as health care for the former. But the CPI-W covers certain categories such as gas prices, housing, food and beverages, housing and recreation, which aren’t the main things retirees spend the majority of their money on anyway.
Medicare can eat away at COLAs, too
But here’s another issue why a low COLA is disappointing to a lot of people. Since seniors pay for Medicare Part B out of benefits, it simply doesn’t make sense why the CPI-W isn’t taking medical costs into consideration since that’s what the extra money is going towards anyway. Not only that but with an increase of $8.80 a month in 2020, those who receive social security will only be left with $14.70 in their pockets.
It’ll be enough to cover very small expenses, but it’s not life-changing stuff.
What can seniors do?
When it comes to COLAs, rises in healthcare and the way the CPI-W data works, there isn’t much to do. These are truly things out of Social Security beneficiaries’ control. The only available option is to cut down costs where available while bringing in more income, either through a part-time job or freelance work.
Luckily, the gig economy makes this easier. It’s not outright impossible to land a position with virtually any skillset. Monetizing a hobby is also another way to generate more money if you market yourself right and can take on a little more work.