Researchers predict a bigger COLA and lower inflation next year
Increased inflation has caused financial pain for senior citizens, who have seen a modest increase in Social Security benefits in 2021, but thanks to those very rising consumer prices, relief is likely on the way.
Researchers at Bank of America Global Securities explained in a note to clients Wednesday that senior citizens who now rely on Social Security benefits may be “squeezed” by rising prices should their budgetary position improve next year, the annual effects of inflation. Due to the Cost of Living Adjustment (COLA).
The cost of living adjustment, which began in 1975, is implemented to counter the effects of inflation.
Social Security Colas: Here’s How It Counts
The Social Security Administration uses a formula to determine what COLA will be each year. It is based on an increase in the Consumer Price Index for urban wage earners and clerical workers, calculated on a monthly basis by the Bureau of Labor Statistics. If there is a measurable increase in the index year after year, the profit will increase.
Bank of America researchers expect inflation to reach 5.5% this year, while the rise in the cost of living was just 1.3%.
But high inflation explains why the Senior Citizens League estimated this month that recipients could see the biggest profit bump since 1983.
Bank of America researchers estimate that profits will increase by about 5.8%.
By their measure, the average Social Security recipient received a $20 per month benefit increase in 2021, but should see an increase of $80 per month in 2022.
Meanwhile, he expects inflation to fall to around 2.3% next year.
This swing in the opposite direction for recipients is one reason the firm’s researchers expect the recovery to remain strong in 2022.
“Seniors and the disabled will do their part in keeping the economy warm,” the researchers concluded.
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The Senior Citizens League forecast an even greater profit bump in 2022 – 6.1%.
However, seniors will have to wait until the new benefit amount arrives next year to see the higher check.