Social Security advocates are pressing lawmakers to pass the one-time emergency 3% Social Security cost-of-living adjustment (COLA) bill that was introduced in mid-October by Rep. Peter DeFazio, D-Ore.
Replacing the announced 1.3% COLA with a 3% increase in 2021 “is a way to provide a more fair and adequate inflation adjustment to beneficiaries,” said Mary Johnson, Social Security and Medicare policy analyst for The Senior Citizens League, in a statement on Tuesday.
DeFazio’s bill, H.R. 8598, which has 95 co-sponsors, with 94 Democrats and one Republican, has been referred to the House Ways and Means Committee.
Johnson told ThinkAdvisor in a Tuesday email that it’s unclear if DeFazio will try and attach the measure to the omnibus spending bill, “which appears to be facing some obstacles to passage,” or to a sweeping retirement bill dubbed the Secure Act 2.0.
The spending bill must be passed in December.
A one-time 3% boost would increase a $1,523 Social Security benefit by about $398 per year on average, over the course of a 25-year retirement period, according to new analysis from The Senior Citizens League.
“Due to the COVID-19 pandemic, seniors are facing additional financial burdens in order to stay safe,” DeFazio said in a statement in mid-October addressing the 1.3% COLA. “This absolutely anemic COLA won’t even come close to helping them afford even their everyday expenses, let alone those exacerbated by COVID-19.”
Greg Valliere, chief U.S. strategist for AGF Investments, said in his Tuesday morning email briefing that Congress “will need at least another week to agree on a massive budget bill and a Covid stimulus package.”
The new deadline is 12:01 a.m. on Dec. 18, Valliere said, “as an expanding group of bipartisan lawmakers shuttle back and forth with new proposals.”
Johnson noted that “because retirees tend to use their Social Security benefits to pay for essentials such as housing and healthcare, it would be a way to help stimulate the economy and to put younger adults back to work, which in turn, means stronger funding for Social Security and Medicare as well.”
As it stands now, the annual inflation adjustment does not accurately reflect the spending patterns of retirees.
A key issue is that the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), “does not measure the spending patterns of retired adults age 62 and older,” Johnson said.
The CPI-W assumes that younger working adults tend to spend about 40% of their income on housing and only 7.5% of their income on medical care, she explained.
However, Johnson states that her research indicates that retirees tend to spend 47% of their income on housing and 14% on medical care, both of which have increased faster than the overall rates of inflation in recent years.
In addition, the CPI-W doesn’t reflect Medicare Part B premiums, which have grown roughly three times faster than COLAs from 2010 to 2021, according to Johnson. “The Federal Reserve doesn’t expect that inflation will be much more than 1.37% for much of the next decade,” she said.
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