2021 Social Security COLA Could Be “Infected” by the Coronavirus

From Birch Gold Group

It appears that the coronavirus, officially known as COVID-19, could claim a surprising victim: the 2021 COLA from Social Security.

According to official statistics, more than 64 million Americans receive more than $1 trillion in Social Security benefits. It also represents about 33% of total income for the elderly.

So when the “cost-of-living adjustment” comes out each year, a large number of Americans are paying attention. For 2020, that adjustment resulted in an increase of 1.6%. Not a huge increase – and not quite enough to keep pace with the official rate of inflation – but certainly better than nothing.

A number of factors go into figuring out the COLA each year, but the main one is a measure of inflation known as the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W).

According to The Motley Fool, “The CPI-W is designed to measure how the price of an identical basket of goods and services changes over time.”

The problem is, the method Social Security uses to calculate COLA doesn’t keep pace with the CPI-W very well. The same piece from The Motley Fool explains:

According to an analysis from The Senior Citizens League, seniors have seen the purchasing power of their Social Security benefits decline by 34% since the year 2000.

Efforts by the Social Security Administration should maintain or improve buying power, not hurt it. Can you imagine losing more than a third of your buying power?

One possible reason for this decline in purchasing power, says The Motley Fool article, is that “Social Security is basing ‘raises’ to be given predominantly to seniors on the spending habits of working-age urban and clerical workers, who rarely are receiving Social Security benefits.”

Another possible reason could be the rate of price inflation itself. Official sources like the Bureau of Labor Statistic (BLS) report it at 2.5%. But the “real” inflation rate reported with older methods could be anywhere from 6% to 10%, according to ShadowStats.

Inflation eats into Social Security raises every year. That’s bad enough. But the coronavirus could also help create the illusion of a higher COLA in 2021.

Energy and Food Inflation Already Affected by COVID-19

It appears that food and energy prices are already on the move, thanks in part to the coronavirus that has spread rapidly since late January.

For example, global crude oil prices are feeling the sting of COVID-19, with West Texas Intermediate crude down 15% year to date. The Motley Fool says that this will “have a negative impact on the energy component within the CPI-W, which made up 8.072% of the CPI-W’s total weighting, as of December 2019.”

Conversely, the prices of food and household goods are moving in the opposite direction:

We’ve witnessed a sharp increase in food and household good inflation in China as COVID-19 has spread. China recently reported that its Consumer Price Index in January rose 5.4% from the prior year period, marking the fastest rate of inflation for the country in eight years.

Given the uncertainty caused by coronavirus, it’s hard to say what inflation will look like for the year. If the drop in oil offsets the rise in food and household products, then the COLA might be minimal.

Then again, food or energy scarcity caused by shutdowns could cause a rapid spike in prices. In such a case, the COLA for 2021 might go up more than normal.

But don’t be fooled by the illusion of a COLA that’s better than normal. After all, it hasn’t kept pace with official inflation, let alone “real” inflation, so don’t expect it to account for a major global issue like COVID-19 and its long-term impact on the economy.

Boost Your Retirement’s Defenses Against a Potential Pandemic

The situation surrounding next year’s Social Security COLA will continue to develop over the coming year. It appears that media and market attention surrounding COVID-19 won’t die down any time soon.

But you don’t have to let your retirement suffer the economic consequences caused by the coronavirus. You have options, and the best time to prepare is now.

Having a diversified retirement plan with assets known for their protection during uncertain times is a strategic way to diversify your nest egg.

Precious metals like gold and silver could prevent your retirement savings from being “infected” by the developing media circus surrounding this virus.

With global tensions spiking, thousands of Americans are moving their IRA or 401(k) into an IRA backed by physical gold. Now, thanks to a little-known IRS Tax Law, you can too. Learn how with a free info kit on gold from Birch Gold Group. It reveals how physical precious metals can protect your savings, and how to open a Gold IRA. Click here to get your free Info Kit on Gold.

-----------------------------------------------------
It is my sincere desire to provide readers of this site with the best unbiased information available, and a forum where it can be discussed openly, as our Founders intended. But it is not easy nor inexpensive to do so, especially when those who wish to prevent us from making the truth known, attack us without mercy on all fronts on a daily basis. So each time you visit the site, I would ask that you consider the value that you receive and have received from The Burning Platform and the community of which you are a vital part. I can't do it all alone, and I need your help and support to keep it alive. Please consider contributing an amount commensurate to the value that you receive from this site and community, or even by becoming a sustaining supporter through periodic contributions. [Burning Platform LLC - PO Box 1520 Kulpsville, PA 19443] or Paypal

-----------------------------------------------------
To donate via Stripe, click here.
-----------------------------------------------------
Use promo code ILMF2, and save up to 66% on all MyPillow purchases. (The Burning Platform benefits when you use this promo code.)

Click to visit the TBP Store for Great TBP Merchandise