More than 62 percent of retirees think that Social Security cost of living adjustments (COLA) need a guaranteed minimum, according to a new survey from a nonpartisan group representing seniors.
Last January, 2021 COLA was 1.3 percent for Civil Service Retirement System (CSRS) annuities, Federal Employees Retirement System (FERS) annuities and Social Security benefits. This was a lower federal retiree COLA than in 2020 when CSRS and FERS retirees received 1.6 percent.
Since then, “inflation has exploded,” says Mary Johnson, a Social Security policy analyst for The Senior Citizens League (TSCL) — the organization that conducted the survey. Johnson researches the effect of rising prices on Social Security benefits.
The survey was was conducted from mid – January through April 20, 2021 and had 1,125 participants. According to TCSL, through the end of December 2020, inflation as measured by the CPI-W — the index used to calculate the annual COLA — was just 1.4% for the year. “But as of the end of March 2021, the CPI-W was more than 3 percent higher than this time a year ago,” Johnson said.
“This is a inflation pattern I haven’t seen before,” Johnson says. Inflation had flat-lined in first quarter of 2020, which included January and February, before the COVID-19 pandemic closed businesses and had a negative effect on the economy in mid-March.
By the end of first quarter 2021, however, inflation grew by 1.4 percent versus zero over first quarter 2020. According to TSCL, the last time inflation was growing at this rate was in 2012.
“When the prices on the goods and services that retirees depend on go through the roof, their Social Security benefits don’t buy as much, and that causes enormous financial stress for all retirees,” Johnson said.
“Newly immunized grandparents will need to budget about 31.2 percent more for car rentals when visiting the grand kids,” Johnson says. “And I’m putting off replacing a failing washing machine. I don’t want to pay 24.2% more to get a new one now.”
Johnson provided a list of list of the items whose costs are among the fastest growing. Among them, physician services increased by 5.3 percent, prescription drugs were down 2.3 percent from March 2020. Housing costs grew slightly faster than the COLA, up by 2 percent.
Fastest Growing Retiree Costs From March 2020 to March 2021
The Senior Citizens League is working with members of Congress to introduce legislation that would strengthen Social Security benefits by tying the annual COLA to the Consumer Price Index for the Elderly (CPI-E), and by providing a guaranteed minimum COLA of no less than 3 percent.
In January 2021, Rep. Gerry Connolly (D-VA) reintroduced legislation which would increase cost of living adjustments (COLA) for some retired federal employees. If passed, the Equal COLA Act (H.R. 304) would guarantee that federal retirees in the Federal Employee Retirement System (FERS) and the Civil Service Retirement System (CSRS) both receive the same annual percentage cost of living increase each year. The legislation would tie both federal retirement system COLAs annual increase to the CPI-W.