As many retirees have guessed, due to rising inflation, the Social Security cost of living adjustment (COLA) may increase significantly just to keep up.
More than halfway through the year, it has not been easy so far for many seniors. Inflation has taken a toll on everyone’s finances amid falling stocks and what many believe to be a looming recession.
Typically, SSI increases are within the range of 2-4%, but after rising inflation at the tail end of 2021, retirees received a 5.9% COLA. In June 2022, inflation reached 9.1%, pointing towards signs of a record-breaking COLA.
As inflation only continues, analysts are predicting that the January adjustment could fall anywhere from 8.6% to 10.8%, some even say it might be as high as 11.4%.
Social Security recipients have not seen a double-digit COLA in over 40 years, since 1981 when it reached 14.3%.
We will have to until October for official word from the Social Security Administration about next year’s increase, based on a calculation that compares the average consumer price index from the third quarter of 2022 with data from the same period last year.
According to the Senior Citizens League, a high COLA will be eagerly anticipated to address an ongoing shortfall in benefits that Social Security beneficiaries are experiencing in 2022 because inflation has run higher than their 5.9% COLA.
A big boost in next year’s COLA could also result in negative tax consequences for older Americans, unless lawmakers change the income thresholds for Social Security beneficiaries.
Increased incomes can result in cuts to income-related benefits for low income people and higher taxes for people with incomes above $25,000 (individuals) or $32,000 (married couples).
Since income thresholds are not adjusted like ordinary tax brackets, such sky-high SSI COLA increases could lead to permanently higher taxes for many retirees.
Just because we know you are likely thinking, “what’s the prospect of a pension COLA in these times,” we will try and address that topic.
In the case of a COLA for Verizon or AT&T pensioners, the chances are probably unlikely, but the ask should be made regardless.
While state and municipal pensions may sometimes see adjustments, corporate pensions over recent decades are typically left untouched, regardless of cost of living changes.
For our fellow retirees whose pensions have been derisked and converted into a group pension annuity, it is unlikely that the insurance company managing those assets would do so for many reasons.
For those who took a pension buyout, it is also not likely, but certainly not unprecedented.
Back in 2000-2003, BellTel advocated for a pension COLA of $700 per month for three consecutive years for retirees surviving on minimum pensions. At that time, the company also granted special lump sum payouts of $2,500 to $20,000 for defined benefit pensioners who had retired before February 1, 1995.
This article was first published in the Fall 2022 BellTel Newsletter.
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