Next Year's Social Security COLA Predicted To Plummet Below 3%

[Fun CH]

Not too good of news for fixed income seniors...
Add the potential Proposition 1 Aquatics District tax levy to this and that would make the news really bad!!!

I agree Ray. Those folks pushing their dream mega spa complex justify taking money from the low income families by saying something like 189 families (have to check that #) in the Methow are receiving a senior tax property tax exemption.

There are three levels of Senior tax exemptions based on income level, however none forgive all of the property taxes. Also many low income community members don't receive any kind of property tax break.

With the property values going up those taxes also go up. So the FOP it's still proposing to take money from those who can least afford it no matter how they try to spin it.

It's stressful getting old and or living pay check to pay check. Money concerns are one of those stressors.

I would argue that currently the FOP board members, some of whom are extremely wealthy, are now detrimental to the health and well-being of the seniors around here.

Taking money from the poor to fund your dream Leisure activity is modeling poor behavior to children.

[Rideback]

Context, looking at the history of COLA for SS

https://www.ssa.gov/oact/cola/colaseries.html

[realoldtimer]

Pasayten posted "Not too good of news for fixed income seniors...
Add the potential Proposition 1 Aquatics District tax levy to this and that would make the news really bad!!!"

For low & fixed income property owners in Twisp, the District 6 Annexation will add about 63 cents to the Town's levy -- making it about $2 per thousand.

Getting expensive to live here.

[mister_coffee]

Keep in mind that inflation coming down does not mean that prices come down. What it means is that the rate of prices increasing goes down. And to be fair inflation is kind of hard to measure and whatever measurement you use will be kind of arbitrary. Inflation measures also account poorly for cases where consumption patterns shift and basically have no meaning at all where the underlying product is changing rapidly (consider cell phones and cell phone service plans).

Economists generally agree that a fairly low rate of inflation is actually good and healthy. They vehemently disagree about what a "fairly low" rate of inflation actually is, though.

Inflation was already baked in as soon as the people first started getting sick from COVID in late 2019.

[Jingles]

Wonder what kind of drugs that person is using to say inflation is declining?

[pasayten]

Not too good of news for fixed income seniors...
Add the potential Proposition 1 Aquatics District tax levy to this and that would make the news really bad!!!

Next Year's Social Security COLA Predicted To Plummet Below 3%
ANNE STANLEY 07:00 AM ET 07/12/2023

Ready for some bad news, retirees? Brace for your smallest Social Security COLA raise in recent memory.

Why? After two years of surging prices, inflation is falling this year. And that will dramatically cut into Social Security recipients' COLA (cost of living adjustment) in 2024, says the Senior Citizens League (SCL), which forecasts the next year's estimated increase.

Beneficiaries will see their annual "raise" lowered to 2.7% from 8.7% in 2023. That would be the smallest COLA hike since before the Covid pandemic. Of course, this is just an estimate. The Social Security Administration has said it will announce in October the next COLA for the 70 million Americans receiving benefits.

But expect economic fallout from such a small COLA.

Prices Remain High
The inflation rate has slowed. But older Americans are still strained from two years of historically high consumer prices. Household expenses remain high in essential spending categories, the SCL says. A June survey shows 62% of participants say food costs as their fastest-growing cost. Housing costs are the biggest concern of 22% of survey respondents.


And yet another obstacle may slow the recovery for Social Security recipients. The Bureau of Labor Statistics reported the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W, fell to 3.6% in May. The inflation rate is likely to continue falling as the year goes on. That's good news for consumers overall. But it could hamper older Americans trying to recover from the financial impacts of Covid-19 and higher consumer prices.

Blame It On The Calendar
Retirees are feeling squeezed because the Social Security Administration calculates next year's Social Security COLA using the average of the CPI-W readings for July, August and September — a period during which the index is expected to be even lower.

Since January, the actual inflation rate was lower than the amount Social Security beneficiaries received in their 8.7% COLAs. "That difference theoretically should provide a modest temporary improvement in buying power of roughly $52 per month for a retiree with average benefits of $1,694.00. Inflation, however, was so severe in 2021 and 2022 that the average Social Security benefit fell behind by $1,054, leaving 53% of retirees doubting they will recover because household costs rose more than the dollar amount of their COLAs," the SCL said in a statement.

Future Inflation Estimates Likely To Meet Fed Target
Economists at Morningstar say that over the 2024 to 2027 period, they expect inflation to average just 1.8% — below the Federal Reserve's 2% target.

"Over 2021 and 2022, strong consumer demand ran into a brick wall of supply constraints, causing prices to explode in many industries, especially food, energy, and durable goods, Preston Caldwell, a senior U.S. economist for Morningstar Research Services, said in a Morningstar note on the economy. But demand is cooling thanks to Fed rate hikes, he said, and supply constraints also are easing. Morningstar estimates inflation will fall to 3.5% for 2023.

The Loss Of Buying Power, And Eggs
Between January 2000 and February 2023, Social Security COLAs increased benefits by 78%, averaging 3.4% annually. But in a study on the loss of buying power for Social Security benefits, SCL policy analyst Mary Johnson says that the cost of goods and services purchased by typical retirees rose by 141.4% over the same period, averaging about 6.2% each year. "For every $100 a retired household spent on goods and services in 2000, that household can only buy about $64 worth today."

This year, buying power was hit hardest by price increases in food, electricity and rental housing. There also was a 16% increase costs for dental care, and repair and maintenance of motor vehicles, Johnson said. "Topping our list of fastest-growing items? Eggs. In fact, no other spending item beat eggs or grew faster" during the survey reference period. The survey compared price changes from March 2022 to February 2023.

Measuring Social Security COLAs Against Medicare Premiums
Another raise most Americans over 65 face each year is the increase in Medicare premiums. Medicare premiums don't rise with the cost of inflation, but they do rise steadily as health care costs increase.

For those who receive both Social Security and Medicare Part B, the Social Security Administration automatically deducts the Medicare premium from monthly benefits. This leaves many beneficiaries wondering if a hike in Medicare premiums will blunt the benefit of a Social Security COLA.

For 2023, the Medicare premiums actually dropped a bit, as the Centers for Medicare & Medicaid Services had added a contingency margin in 2022 for higher costs related to an Alzheimer's drug. The drug, Aduhelm, was approved but related costs were much lower than expected. That contingency was part of the reason Medicare premiums in 2022 were 14.5% higher than the year before. Overall, in the more than 50-year history of the program, the compounded annual increase in premium cost is about 7.7%.

The 'Hold Harmless Provision'
Social Security works with the Centers for Medicare and Medicaid Services to prevent a reduction in Social Security benefits as a result of Medicare Part B premium increases. The "hold harmless provision" protects Social Security benefit payments from decreasing due to an increase in the Medicare Part B premium for most beneficiaries.

But to qualify for the hold harmless provision, recipients must receive Social Security benefits or be eligible for Social Security benefits for November and December of the current year. They must also have Medicare Part B premiums for December and January deducted from monthly benefits.

The Centers for Medicare and Medicaid Services usually announce the following year's premiums in the fall.

Good News: Retirees Don't Live On Fixed Incomes
But timing, the inflation index and even a big Medicare premium increase shouldn't cloud the value of Social Security's COLA. That's the advice of Alicia H. Munnell, director of the Center for Retirement Research at Boston College. "Retirees don't live on fixed incomes," she said.

Munnell says people are skeptical about whether retirees are protected against the eroding impacts of inflation. That's probably due to the fact that the COLA is backward looking and may not reflect current levels of inflation; Social Security may not be using the right index to calculate the COLA; and Medicare Part B premium increases offset the COLA, she wrote.

However, even 2022's "unusually high Part B premium offset less than 25% of the Social Security COLA." This year's Part B premium actually fell, helping some "retirees cover some of the higher prices they face. The bottom line is that retirees do not live on fixed incomes. Their monthly benefits go up when prices rise."