Expect lower Social Security COLA amid slower inflation

investmentnews.com:

Inflation cooled last month to its lowest level in several years, data today from the Bureau of Labor Statistics show, reenforcing estimates that the Social Security COLA next year will be around a modest 2.6 percent.

But that will leave many retirees who live on a fixed income wanting more, as recent cost increases in critical categories are outpacing that.

Over the past 12 months through July, the rate of inflation was 2.9 percent, according to the figures from the Consumer Price Index for All Urban Consumers published Wednesday morning by the Bureau of Labor Statistics. While inflation is falling, the cost of living adjustments (COLAs) for Social Security benefits have not kept pace over 10 years, data from The Senior Citizens League show.

And further, the cost increases that retirees experience are often higher than those for workers, due in part to higher medical costs and long-term care.

“That is the key issue for all retirees,” said Mary Johnson, an independent Social Security and Medicare policy analyst. “Older consumers would consider this probably a COLA that, while they’re happy to have it … they are going to feel that it doesn’t very accurately affect their buying power.”

Social Security COLAs are based on price increases experienced by younger working adults, which is why the program’s benefits have lagged expenses for retirees, Johnson said.

Since 2010, the buying power of Social Security benefits has decreased on average by 20 percent, according to a report last month by The Senior Citizens League.

“The reality is that COLAs have become less and less likely to match inflation over time. In the 1990s and 2000s, 60 percent of COLAs beat inflation. In the 2010s, only 40 percent did. Through the 2020s so far,