Social Security beneficiaries are in for a smaller cost of living adjustment (COLA) in 2020.
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The average beneficiaries’ check will increase 1.6 percent, the Social Security Administration said on Thursday.
That compares with the $40.90 beneficiaries received in 2019 from a 2.8 percent COLA.
Cost-of-living adjustments, which began in 1975, are implemented in order to counteract the effects of inflation. But consumer costs appear to be rising at a much faster rate than the purchasing power of Social Security benefits.
The increase, therefore, is unlikely to appease senior advocacy groups who have been warning that Social Security raises have not kept up with costs of living.
According to research from The Senior Citizens League, between January 2000 and January 2019, COLAs increased Social Security benefits by about 50 percent. However, costs associated with the types of goods and services typically purchased by beneficiaries rose by more than 100 percent over the same timeframe. Over the past year, some of the fastest rising costs have included prescription drugs, fresh fruits and vegetables.
The cost of living adjustment in 2019 was 2.8 percent, the biggest check increase in seven years. It boosted the average beneficiaries’ check by $39 per month – or $468 per year. However, 78 percent of respondents in The Senior Citizens League’s survey said that monthly expenses rose by more than $39.
Overall, the group says Social Security benefits have lost 33 percent of their buying power since 2000.
The COLA for 2018 was 2 percent, but it was largely perceived to be offset by increases in Medicare costs.
There was a 0.3 percent increase in 2017, and no adjustment the year prior.
Even during years with minimal, or no, COLA increase, retiree costs continued to climb, the report noted.
Meanwhile, bolstering the program has become a focus on Capitol Hill as 10,000 Baby Boomers turn age 65 each day in the U.S. and funding is running low.
Massachusetts Democrat Elizabeth Warren – a 2020 presidential hopeful – recently released a plan to expand Social Security by hiking payroll and investment income taxes on wealthier Americans. Oregon Democrat Sen. Ron Wyden released details last month for his plan to increase capital-gains taxes, where he says he would use the revenue to boost the solvency of the program.
Social Security’s reserve funds are expected to be depleted in 2035, at which time the program would no longer be able to pay out benefits in full.