As we mentioned last week, TSCL’s projections are particularly anticipated. Though there are many seniors organizations that take a stab each year at predicting the following year’s COLA, TSCL is notably accurate in its calculations and predictions.
This year, despite many groups’ less optimistic estimates, TSCL gave one of the highest 2021 COLA projections. While most groups believed the massive drop in oil prices in 2020 would result in a net decrease in inflation, resulting in no COLA or a COLA of less than 1%, TSCL predicted the COLA would fall around 1.3%.
On Tuesday, the Social Security Administration gave their official word on 2021’s COLA: 1.3%. Even though TSCL stood out as the high estimate, they’ve yet again demonstrated why they’re a respected name in the COLA prediction game—good work, guys!
Now, we realize 1.3% amounts to a drop in the bucket to most retirees. For the average beneficiary, this will be an extra $20 on top of their monthly benefits—hardly raise enough to make a significant impact on their finances. A 1.3% increase is among one of the lowest COLAs ever issued.
But at the beginning of the year, most seniors’ groups—including us—very seriously speculated on the reality that there would be no COLA at all. With gas prices factoring so heavily into the formula used to determine COLA raises, an unprecedented collapse of oil prices can all but guarantee seniors lose their COLA. This represents a major problem with how we’re currently calculating Social Security COLAs.
While the CPI-W continues to be the formula by which we calculate COLAs for seniors, this outcome for 2021 is STILL a positive outcome, even if it is bittersweet. Under the CPI-W, most of us were all but certain seniors would receive nothing at all because of the COVID economy, so any amount of a raise would have been welcome. And we are happy to see that the highest estimate given has indeed turned out to be the COLA for next year.
That being said, we are all facing dire financial circumstances right now—seniors, perhaps, most of all. Even if COVID hadn’t happened, these several years of some of the lowest increases on record are not at all realistic or helpful when looking at the steadily increasing prices of the things seniors actually buy, namely healthcare, medicine, and grocery goods.
And WITH COVID, all of these things are more expensive than they were last year. In fact, these prices have raised so much, they’re actually the main reason we ARE seeing a COLA in spite of falling oil prices. It’s simply not accurate to say seniors are experiencing a net decrease in inflation. Seniors don’t have the same needs other demographic groups do.
There are alternatives to the CPI-W calculation formula. The idea of a CPI-E (consumer price index, elderly) has been around for a very long time, and we know that if we use an index that weights properly for retiree spending habits, it WILL increase COLA raises every year.