Tens of millions of older Americans are about to get what may be the biggest raise of their lifetimes.
On Thursday, the U.S. government is set to announce how big a percentage increase Social Security beneficiaries will see in monthly payments this upcoming year. It’s virtually certain to be the largest in four decades. It’s all part of an annual ritual where Washington adjusts Social Security benefits to keep up with inflation, or at least with one narrow measure of it.
Since the 2008 financial crisis, the U.S. government has announced zero increases to Social Security benefits three times because inflation was so weak.That's the intent. As Americans have become painfully aware over the past year, each $1 doesn't go as far at the grocery store as it used to.No. The first American to get a monthly retirement check from Social Security, Ida May Fuller from Ludlow, Vermont, got the same $22.54 monthly benefit for 10 years.
The CPI-W, meanwhile, covers only about 29% of the U.S. population. It has been around longer than the CPI-U, which the government began compiling only after the legislation that required Social Security's annual increases be linked to inflation.Yes, and some critics have argued for years that Social Security should change to a different measure, one that’s pegged to older people in particular.
All indexes give just a rough approximation of what inflation really is. But the more pressing challenge may be that if the government switched to a different index, one that showed higher inflation for older Americans, Social Security would have to pay out higher benefits. “The COLA doesn't take into account where you live or your actual spending patterns,” said William Arnone, CEO of the National Academy of Social Insurance."For some people, it's an overstatement of cost of living for, say, small towns in the Midwest versus urban areas like New York, D.C. or Chicago. With many older people choosing to live in suburban areas or rural areas, some will benefit more” than others from the same-sized increase.
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