The likelihood that seniors will see no cost-of-living adjustment in 2021 is high, according to the Senior Citizens League.
The recent plunge in oil prices has “all but wiped out the prospect of a Social Security cost-of-living adjustment (COLA) for next year,” according to Mary Johnson, a policy analyst with the group.
The inflation index on which COLAs are based, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), increased 0.1% in April from a year ago and fell 0.7%, without seasonal adjustments, from March, according to the Bureau of Labor Statistics.
Based on CPI data through April, Johnson estimates that the COLA for 2020 will be zero. This estimate could change, though, since five months of data have yet to be collected before the Social Security Administration makes its October announcement about the COLA for 2021.
The COLA for 2020 was 1.6%, “already low to begin with,” Johnson noted. In addition, the buying power of Social Security has fallen 30% since 2000, according to the group’s latest study, released earlier in May.
The Senior Citizens League is a lobbying group that argues that the CPI-W does not accurately reflect the spending patterns of seniors, including higher health care spending, and that COLAs should instead be tied to the Consumer Price Index for the Elderly.
While the group’s research found a 3 percentage point gain in the buying power of Social Security benefits over 2019, lower prices signal deflation. And that “means a lower cost-of-living adjustment (COLA) is on the way,” Johnson added.
One academic specialist in COLAs and Social Security believes that the coronavirus pandemic could lead to a zero COLA adjustment next year.