When trying to solve for a math problem, we often have variables we must understand first. Solving for X will help us solve for Y. Changing one variable will influence the other, but if all is kept constant, there’s no change at all. We can look at Social Security and Inflation the same way. If inflation stays high, it’ll force cost of living to stay high as well. Then seniors will find themselves in the same tough situation, as Barron Magazine reports on the low impact this new COLA will have in the face of consistent inflation.
Consistent Inflation vs. COLA
The latest cost-of-living adjustment is predicted to be highest adjustment in Social Security history. But at the current rate of inflation, how much purchasing power do seniors on benefits really have?
According to the Barron, despite a predicted COLA increase between nine and ten percent, seniors are having trouble keeping up. In 2021, seniors lost three percent of their buying power, and that year COLA was once again the highest on record.
At this point, consistent inflation is the benchmark, as if it were to raise, then things would only get worse. There are several potential outcomes if we change the inflation variable:
If inflation were to cool and depending on the time of year when it did, seniors could have a lower cost-of-living and a locked-in higher benefit for a full year. That returns some of their buying power but would ultimately hurt the trust overall. A higher COLA benefit means that the program is spending more money than it necessarily has to spend.
Alternatively, higher inflation would also result in a higher COLA but limits the buying power of seniors even more.
Our best hope is that inflation is cooled down steadily, so seniors can ease their financial strife and the economy can resume its growth at a health pace. We need to protect the Trust from insolvency, and a higher COLA would serve as greater motivation to keep Social Security afloat.
For more retirement information and the help protect the Trust, join the Council for Retirement Security today.
