Way back at the start of the pandemic, we wrote this short blog speculating about this year’s COLA given the economic impact of COVID-19.
At the time, oil, one of the biggest commodities influencing the cost of living, had collapsed in price. Demand for oil and gasoline was historically low due to worldwide travel restrictions and stay-at-home orders. At one point in early 2020, the oil market had fallen so low it was worth LESS than nothing. It lost buyers money to store the barrels, so buyers were paying people to take them. We were truly living in Upside Down World.
But with the entrance of the COVID vaccine and countries slowly lifting their travel restrictions, not only has the price of gas rallied, but also the price of vehicles, another important consumer good.
And as we’re sure you’ve probably noticed, the price of groceries and basic household goods remains as high as it ever was. Production chains remain affected by raw material and worker shortages.
All these rising prices mean Americans are paying a pretty penny this year to maintain their previous years’ quality of living. And when the cost of living rises, so too must the COLA rise to stretch retirees’ benefits farther.
This time last year we were wondering whether a collapse in market goods would obliterate the COLA.
But this year the question is: how high is the COLA going to be?
It very way may be the highest COLA we’ve seen in over ten years if the Bureau of Labor Statistics’ most recent inflation reports are to be believed.
According to these reports, we’ve seen the largest 12-month core inflation increase since the 2008 Recession. Especially unusual is a 70-year price high for used vehicles, accounting for as much as a third of the total price increase.
Assuming inflation rates reported this spring remain stable throughout the year, retirees could see anywhere from a 3.1% to a 5.3% increase. The latter estimate was calculated by The Senior Citizens League.
Ultimately, the raise we’ll see on next year’s Social Security checks will depend largely on the next moves the Federal Reserve makes.
Should the Federal Reserve choose to raise interest rates—a move it has not taken just yet—this could affect the final estimates for 2022’s COLA.