Earlier this week, the news broke that seniors on Social Security will be in line for a 1.3% cost-of-living adjustment (COLA) going into 2021. Earlier in the year, it seemed as if seniors wouldn't be eligible for a raise at all, so the fact that they're getting a bump in benefits is technically a good thing.
But a 1.3% raise is hardly much to write home about. For the typical beneficiary today, it will amount to less than $20 extra per month, and that assumes that Medicare Part B premiums will hold steady going into 2021, which is unlikely to happen. As such, a 1.3% COLA could translate into a negligible boost for seniors who are already desperate for money, especially in light of the coronavirus pandemic.
It's for this very reason that two Democratic lawmakers, Reps. Peter DeFazio of Oregon and John Larson of Connecticut, are aiming to introduce a bill to raise next year's 1.3% COLA to a 3% emergency boost instead. The bill, called the Emergency Social Security COLA for 2021 Act, is scheduled to be introduced on Friday, and if it's passed into law, it could be a huge lifeline for seniors who are currently struggling to make ends meet.
Seniors on Social Security need relief
Many seniors who collect Social Security get the bulk of their retirement income from their benefits. For the average recipient, that amounts to an annual income of just over $18,000. As if that weren't bad enough, Social Security raises have been stingy in recent years. Seniors only got a 1.6% boost going into 2020, and generally speaking, COLAs have done a poor job of helping beneficiaries retain their buying power in the face of inflation.
Rising healthcare costs in particular have been burdensome for seniors, with Medicare Part B premiums jumping from year to year and eating away at COLAs. Throw in the upheaval the coronavirus pandemic has caused, and it's clear that seniors need extra relief right now, not an almost meaningless 1.3% raise.
Though COLAs have averaged 1.4% over the past 10 years, between 1999 and 2009, they averaged 3%. That's more in line with the typical cost-of-living raises workers are generally privy to.
Of course, this speaks to a greater issue: the way Social Security COLAs are calculated in the first place. They're determined based on third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which measures changes in the cost of common goods and services.
But critics of this long-standing system argue that the CPI-W doesn't reflect the costs that commonly monopolize seniors' income, like healthcare. Both DeFazio and Larson each have previously proposed using the Consumer Price Index for the Elderly, or CPI-E, to calculate COLAs, since that index would constitute a more appropriate measure.
If the proposed 3% emergency COLA isn't passed, seniors are apt to have a difficult time staying afloat financially in 2021. And at a time when the economy is in shambles and a recovery seems a long way off, that's a dangerous prospect.