Plenty of controversy accompanies the move, known as a cost-of-living adjustment or COLA.
Critics say the data the government uses to set the increase doesn’t reflect what older Americans are actually spending, and thus the inflation they’re actually feeling. The increase is also one-size-fits-all, which means beneficiaries get the same raise regardless of where they live or how big a nest egg they may have.No, but it’s likely the heftiest in 40 years, which is longer than the vast majority of Social Security beneficiaries have been getting payments. In 1981, the increase was 11.2%.
More specifically, the increase is based on how much the CPI-W increases from the summer of one year to the next.No. People generally pay more attention to a much broader measure of inflation, the CPI-U index, which covers all urban consumers. That covers 93% of the total U.S. population. “The COLA doesn’t take into account where you live or your actual spending patterns,” said William Arnone, CEO of the National Academy of Social Insurance. “For some people, it’s an overstatement of cost of living for, say, small towns in the Midwest versus urban areas like New York, D.C. or Chicago. With many older people choosing to live in suburban areas or rural areas, some will benefit more” than others from the same-sized increase.
Social Security’s boost, though, will have a smaller impact on the economy than past stimulus packages provided by Washington, snarls in supply chains caused by worldwide shutdowns of businesses or other factors that economists say are behind the worst inflation in decades.
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