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Every year since 1975, there has been a Cost of Living Adjustment for Social Security and other benefits. It’s pegged to inflation, which has been pretty much flat recently, leading many economists to expect there won’t be any COLA this year. It would be the just the third time in four decades that’s happened, all within the last five years. About 70 million people on Social Security and other benefit programs will be affected.
Seventy-eight-year-old Jane lives in subsidized, assisted living unit at Mercy Housing in Knoxville, Tennessee, and relies on Social Security for rent, health care and groceries. She said those things are getting more expensive and was looking forward to a benefits increase.
Without it, she said, “I think it’s going to work a hardship on a lot of senior citizens.” She said she’ll probably have to cut back on groceries because her prescription drug prices are going up as well, and she doesn’t know where else to cut.
But economists say low inflation means people shouldn’t need the adjustment. In theory, low inflation means the cost of goods shouldn’t be going up. Given what we learn each month from the consumer price index, things will probably stay that way for a while yet.
But small changes in prices can be particularly acute for those on a fixed income. Munnell has forthcoming research comparing whether the inflation experienced by seniors differs significantly from everyone else, as some argue. She said in the big picture, some higher costs for seniors, like health care, are offset elsewhere.
“There are other components that the elderly do not spend money on, such as tuition and things like that,” she said. Younger people have to absorb rising costs of child care and education, plus spend more in certain sectors of the economy than seniors. Munnell said that balances things out on paper, even if not in the lives of every senior.
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