4.7% SS COLA?

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CABob
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4.7% SS COLA?

Post by CABob »

According to this link there might be a 4.7% adjustment to Social Security benefits next year. Sounds like a good news/bad news issue reflecting actual costs that will be experienced.
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pahkcah
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Re: 4.7% SS COLA?

Post by pahkcah »

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased by 0.89 percent in April 2021. That means the 2022 Cost of Living Adjustment (COLA) for Social Security and Federal pensions currently stands at 3.08%. The final COLA will be based on any monthly additions or subtractions through the month of September. As was stated in the referenced article, the COLA for 2021 was 1.3%

The numbers can indeed be a good news/bad news kind of thing. As an example, back in 1981 the Social Security increase was 11.2%. Sounds great until that number is compared to what was happening to overall prices for goods and services. My supervisor had a mortgage that was over 17%, and my pay raise (Federal Government) that year was 4.4%. I wouldn’t call that situation “good news”.
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David Jay
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Re: 4.7% SS COLA?

Post by David Jay »

That is one organization’s best guess.

They have no data for May, June, July, August and September so they cannot know next year’s COLA - Social Security COLA is based on October through September numbers.
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trueblueky
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Re: 4.7% SS COLA?

Post by trueblueky »

SS COLA is based on the average change in CPI-W over the three months of the third quarter (July, August, September) compared to the same quarter the previous time there was an increase.

Since this is backward looking, you benefit from the higher prices you are already experiencing.
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Metsfan91
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Re: 4.7% SS COLA?

Post by Metsfan91 »

CABob wrote: Sat May 15, 2021 10:13 am According to this link there might be a 4.7% adjustment to Social Security benefits next year. Sounds like a good news/bad news issue reflecting actual costs that will be experienced.
Highly doubt it. 4.7% COLA rate doesn't meet the eye test. The rate is too high. If I were to place any bet on SS COLA, it'll be that COLA will be less than 4%.
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Arby
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Re: 4.7% SS COLA?

Post by Arby »

CABob wrote: Sat May 15, 2021 10:13 am If I were to place any bet on SS COLA, it'll be that COLA will be less than 4%.
I also would take the Under on 4.7% or even 4%

Guess the question is whether the March and April CPI-W numbers are a trend or an aberration? My guess it's just noise and that the new COLA will be less than 3%.
wolf359
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Re: 4.7% SS COLA?

Post by wolf359 »

The fact that SS has a COLA is known. Exactly what the rate will be next year is pure speculation.

IMPORTANT NOTE: I am not currently claiming Social Security, so someone who is should confirm whether or not my comments below are actually accurate.


There are two things to note about the COLA.

1) If the COLA works as advertised, then your buying power should stay substantially the same. A large or a small COLA should not make any effective difference in your standard of living, because it's supposed to track with your actual expenses.

2) The COLA is set to the wrong benchmark. It does not track expenses for retired senior citizens accurately, and therefore helps less and less each year.

From this, I concluded that Social Security is best kept as longevity insurnce, a stream of income to be invoked as late as possible, to make it as large as possible. It shouldn't be used as your sole income stream if you can help it. It is best used to prevent you from depleting your investments.
grok87
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Re: 4.7% SS COLA?

Post by grok87 »

trueblueky wrote: Sat May 15, 2021 5:51 pm SS COLA is based on the average change in CPI-W over the three months of the third quarter (July, August, September) compared to the same quarter the previous time there was an increase.

Since this is backward looking, you benefit from the higher prices you are already experiencing.
thanks.

does anyone have a link to the actual analysis done by the senior citizen's league?

i think weird things can probably happen here because inflation has been so volative with deflation happening as well. and the social security adjustments are floored at zero. so just to give a hypothetical, if there was 10% deflation one year and 11% inflation the next year so that prices were flat over that 2 year period, the cola adjustments would be 0% and 11% which is obviously good news for Social security recipients.

cheers,
grok
RIP Mr. Bogle.
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Re: 4.7% SS COLA?

Post by #Cruncher »

grok87 wrote: Sun May 16, 2021 5:50 amdoes anyone have a link to the actual analysis done by the senior citizen's league?
I looked, but couldn't find any analysis. It may simply be an extrapolation of the 4.7% April 2020 to April 2021 increase. If so, they're implicitly assuming the same 1.56% increase April to Jul-Aug-Sep average as occurred in 2020. Here are the last ten years of the CPI-W for reference (from "U.S. city average, All items - CWUR0000SA0" at BLS CPI-W Top Picks).

Code: Select all

                                                    - Change vs Prior Year -
         Apr      Jul      Aug      Sep   SS Avg    SS-Apr   Apr-SS    SS-SS
2011  221.743  222.686  223.326  223.688  223.233
2012  227.012  225.568  227.056  228.184  226.936    1.69%   (0.03%)   1.66% 
2013  228.949  230.084  230.359  230.537  230.327    0.89%    0.60%    1.49% 
2014  233.443  234.525  234.030  234.170  234.242    1.35%    0.34%    1.70% 
2015  231.520  233.806  233.366  232.661  233.278   (1.16%)   0.76%   (0.41%)
2016  233.438  234.771  234.904  235.495  235.057    0.07%    0.69%    0.76% 
2017  238.432  238.617  239.448  240.939  239.668    1.44%    0.52%    1.96% 
2018  244.607  246.155  246.336  246.565  246.352    2.06%    0.71%    2.79% 
2019  249.332  250.236  250.112  250.251  250.200    1.21%    0.35%    1.56% 
2020  249.515  252.636  253.597  254.004  253.412   (0.27%)   1.56%    1.28% 
2021  261.237                             265.322*   3.09%    1.56%    4.70%
grok87 in same post wrote:... social security adjustments are floored at zero. so just to give a hypothetical, if there was 10% deflation one year and 11% inflation the next year so that prices were flat over that 2 year period, the cola adjustments would be 0% and 11% which is obviously good news for Social security recipients.
That's not quite how it works. For example as shown above, the CPI-W fell 0.41% from 2014 to 2015 so there was no COLA for 2016. However, the COLA for 2017 was not based on the 0.76% increase 2015 to 2016. It was only 0.3% based on the increase from 2014 to 2016 (0.3% = 235.057 / 234.242 - 1). The bottom of this SSA webpage shows the COLAs since 1975.

* Estimated 4.7% increase from prior year.
Last edited by #Cruncher on Sun May 16, 2021 7:14 am, edited 1 time in total.
grok87
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Re: 4.7% SS COLA?

Post by grok87 »

#Cruncher wrote: Sun May 16, 2021 6:57 am
grok87 wrote: Sun May 16, 2021 5:50 amdoes anyone have a link to the actual analysis done by the senior citizen's league?
I looked, but couldn't find any analysis. It may simply be an extrapolation of the 4.7% April 2020 to April 2021 increase. If so, they're implicitly assuming the same 1.56% increase April to Jul-Aug-Sep average as occurred in 2020. Here are the last ten years of the CPI-W for reference (from "U.S. city average, All items - CWUR0000SA0U.S. city average, All items - CWUR0000SA0" at BLS CPI-W Top Picks).

Code: Select all

         Apr      Jul      Aug      Sep   SS Avg    SS-Apr   Apr-SS    SS-SS
2011  221.743  222.686  223.326  223.688  223.233
2012  227.012  225.568  227.056  228.184  226.936    1.69%   (0.03%)   1.66% 
2013  228.949  230.084  230.359  230.537  230.327    0.89%    0.60%    1.49% 
2014  233.443  234.525  234.030  234.170  234.242    1.35%    0.34%    1.70% 
2015  231.520  233.806  233.366  232.661  233.278   (1.16%)   0.76%   (0.41%)
2016  233.438  234.771  234.904  235.495  235.057    0.07%    0.69%    0.76% 
2017  238.432  238.617  239.448  240.939  239.668    1.44%    0.52%    1.96% 
2018  244.607  246.155  246.336  246.565  246.352    2.06%    0.71%    2.79% 
2019  249.332  250.236  250.112  250.251  250.200    1.21%    0.35%    1.56% 
2020  249.515  252.636  253.597  254.004  253.412   (0.27%)   1.56%    1.28% 
2021  261.237                             265.322*   3.09%    1.56%    4.70%
grok87 in same post wrote:... social security adjustments are floored at zero. so just to give a hypothetical, if there was 10% deflation one year and 11% inflation the next year so that prices were flat over that 2 year period, the cola adjustments would be 0% and 11% which is obviously good news for Social security recipients.
That's not quite how it works. For example as shown above, the CPI-W fell 0.41% from 2014 to 2015 so there was no COLA for 2016. However, the COLA for 2017 was not based on the 0.76% increase 2015 to 2016. It was only 0.3% based on the increase from 2014 to 2016 (0.3% = 235.057 / 234.242 - 1). The bottom of this SSA webpage shows the COLAs since 1975.

* Estimated 4.7% increase from prior year.
Ah i see. Thanks for the correction.
How would it work for ibonds in this scenario?
RIP Mr. Bogle.
trueblueky
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Re: 4.7% SS COLA?

Post by trueblueky »

grok87 wrote: Sun May 16, 2021 5:50 am
trueblueky wrote: Sat May 15, 2021 5:51 pm SS COLA is based on the average change in CPI-W over the three months of the third quarter (July, August, September) compared to the same quarter the previous time there was an increase.

Since this is backward looking, you benefit from the higher prices you are already experiencing.
thanks.

does anyone have a link to the actual analysis done by the senior citizen's league?

i think weird things can probably happen here because inflation has been so volative with deflation happening as well. and the social security adjustments are floored at zero. so just to give a hypothetical, if there was 10% deflation one year and 11% inflation the next year so that prices were flat over that 2 year period, the cola adjustments would be 0% and 11% which is obviously good news for Social security recipients.

cheers,
grok
Bold added.
The increase would be 0.
100(.9)(1.11) = 100 (almost)
The following year would still use 100 as its standard for comparison.
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Re: 4.7% SS COLA?

Post by grok87 »

trueblueky wrote: Sun May 16, 2021 11:30 am
grok87 wrote: Sun May 16, 2021 5:50 am
trueblueky wrote: Sat May 15, 2021 5:51 pm SS COLA is based on the average change in CPI-W over the three months of the third quarter (July, August, September) compared to the same quarter the previous time there was an increase.

Since this is backward looking, you benefit from the higher prices you are already experiencing.
thanks.

does anyone have a link to the actual analysis done by the senior citizen's league?

i think weird things can probably happen here because inflation has been so volative with deflation happening as well. and the social security adjustments are floored at zero. so just to give a hypothetical, if there was 10% deflation one year and 11% inflation the next year so that prices were flat over that 2 year period, the cola adjustments would be 0% and 11% which is obviously good news for Social security recipients.

cheers,
grok
Bold added.
The increase would be 0.
100(.9)(1.11) = 100 (almost)
The following year would still use 100 as its standard for comparison.
thanks
RIP Mr. Bogle.
pshonore
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Re: 4.7% SS COLA?

Post by pshonore »

As of today, the COLA would be 2.1%, comparing the May release figures (Feb, Mar April) to last years average for (July Aug Sept). A lot can change between and September. If the trend of the last few months continues, 4.8% is certainly achievable
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Re: 4.7% SS COLA?

Post by Thesaints »

Does the SS taxable base also increase by the COLA amount ?
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Re: 4.7% SS COLA?

Post by trueblueky »

Thesaints wrote: Sun May 16, 2021 12:01 pm Does the SS taxable base also increase by the COLA amount ?
No. The amount of your salary subject to Social Security is adjusted annually by a different metric -- the National Average Wage Index, which measures changes in wages.

NAWI is also used to adjust your past earnings until you turn 60, so that $10,000 you earned in 2000 might show as $20,000 in figuring your SS benefit (fake numbers, I did not look it up).

To make things even more fun, your tax brackets are adjusted using chained CPI, which is lower than the CPI-W used to compute SS COLA. And none of these use CPI-E, a measure designed around a market basket of goods applicable to the elderly.
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Re: 4.7% SS COLA?

Post by Thesaints »

trueblueky wrote: Sun May 16, 2021 12:18 pm
Thesaints wrote: Sun May 16, 2021 12:01 pm Does the SS taxable base also increase by the COLA amount ?
No. The amount of your salary subject to Social Security is adjusted annually by a different metric -- the National Average Wage Index, which measures changes in wages.

NAWI is also used to adjust your past earnings until you turn 60, so that $10,000 you earned in 2000 might show as $20,000 in figuring your SS benefit (fake numbers, I did not look it up).

To make things even more fun, your tax brackets are adjusted using chained CPI, which is lower than the CPI-W used to compute SS COLA. And none of these use CPI-E, a measure designed around a market basket of goods applicable to the elderly.
I see. They are trying to maximize receipts and minimize outlays...
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Re: 4.7% SS COLA?

Post by Oicuryy »

grok87 wrote: Sun May 16, 2021 5:50 am does anyone have a link to the actual analysis done by the senior citizen's league?
https://seniorsleague.org/assets/Loss-o ... -Study.pdf

Ron
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pahkcah
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Re: 4.7% SS COLA?

Post by pahkcah »

pshonore wrote: Sun May 16, 2021 11:58 am As of today, the COLA would be 2.1%, comparing the May release figures (Feb, Mar April) to last years average for (July Aug Sept). A lot can change between and September. If the trend of the last few months continues, 4.8% is certainly achievable
I check the National Active and Retired Federal Employees (NARFE) web site monthly to see how the CPI-W changes on a month-to-month basis. The chart at the bottom of the page shows "% Toward 2022 COLA". Understanding that the COLA will be based on the change in average of the months of July, August, and September, this is the best resource I have found to easily track the COLA prior to the final amount being announced each October. Here's the site:
https://www.narfe.org/legislation/?fa=v ... le&id=2588

The CPI for May is scheduled to be released at 8:30 A.M. on June 10. Let's see if the trend continues.
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Re: 4.7% SS COLA?

Post by grok87 »

Oicuryy wrote: Sun May 16, 2021 12:33 pm
grok87 wrote: Sun May 16, 2021 5:50 am does anyone have a link to the actual analysis done by the senior citizen's league?
https://seniorsleague.org/assets/Loss-o ... -Study.pdf

Ron
thank you
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Re: 4.7% SS COLA?

Post by FactualFran »

grok87 wrote: Sun May 16, 2021 7:04 am
#Cruncher wrote: Sun May 16, 2021 6:57 am That's not quite how it works. For example as shown above, the CPI-W fell 0.41% from 2014 to 2015 so there was no COLA for 2016. However, the COLA for 2017 was not based on the 0.76% increase 2015 to 2016. It was only 0.3% based on the increase from 2014 to 2016 (0.3% = 235.057 / 234.242 - 1). The bottom of this SSA webpage shows the COLAs since 1975.
Ah i see. Thanks for the correction.
How would it work for ibonds in this scenario?
The inflation adjustment for I-Bonds works differently than the COLA for Social Security. Although the COLA for Social Security carries forward what a negative adjustment would have been and uses it to offset future positive adjustments, I-Bonds do not carry forward a negative inflation adjustment.

For example, the semi-annual inflation adjustment for I-Bonds announced in May 2009 was -2.78%. That was the difference in the CPI-U for September 2008 (218.783) and March 2009 (212.709). For the six month that I-Bonds used that inflation adjustment, the redemption value of I-Bonds did not increase, ignoring increases due to the phase-out of an early redemption penalty. No I-Bond had a fixed rate that was high enough to completely offset the negative inflation adjustment. The interest rate of all I-Bonds was zero.

The semi-annual inflation adjustment for I-Bonds announced in November 2009 was 1.53%. For the six month that I-Bonds used that inflation adjustment, they had an interest rate based on that inflation adjustment. The negative inflation adjustment announced in May 2009 had no effect on later interest rates.
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Re: 4.7% SS COLA?

Post by grok87 »

FactualFran wrote: Sun May 16, 2021 5:58 pm
grok87 wrote: Sun May 16, 2021 7:04 am
#Cruncher wrote: Sun May 16, 2021 6:57 am That's not quite how it works. For example as shown above, the CPI-W fell 0.41% from 2014 to 2015 so there was no COLA for 2016. However, the COLA for 2017 was not based on the 0.76% increase 2015 to 2016. It was only 0.3% based on the increase from 2014 to 2016 (0.3% = 235.057 / 234.242 - 1). The bottom of this SSA webpage shows the COLAs since 1975.
Ah i see. Thanks for the correction.
How would it work for ibonds in this scenario?
The inflation adjustment for I-Bonds works differently than the COLA for Social Security. Although the COLA for Social Security carries forward what a negative adjustment would have been and uses it to offset future positive adjustments, I-Bonds do not carry forward a negative inflation adjustment.

For example, the semi-annual inflation adjustment for I-Bonds announced in May 2009 was -2.78%. That was the difference in the CPI-U for September 2008 (218.783) and March 2009 (212.709). For the six month that I-Bonds used that inflation adjustment, the redemption value of I-Bonds did not increase, ignoring increases due to the phase-out of an early redemption penalty. No I-Bond had a fixed rate that was high enough to completely offset the negative inflation adjustment. The interest rate of all I-Bonds was zero.

The semi-annual inflation adjustment for I-Bonds announced in November 2009 was 1.53%. For the six month that I-Bonds used that inflation adjustment, they had an interest rate based on that inflation adjustment. The negative inflation adjustment announced in May 2009 had no effect on later interest rates.
thanks, that's very helpful.
cheers,
grok
RIP Mr. Bogle.
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Re: 4.7% SS COLA?

Post by #Cruncher »

FactualFran wrote: Sun May 16, 2021 5:58 pmFor example, the semi-annual inflation adjustment for I-Bonds announced in May 2009 was -2.78%. ... No I-Bond had a fixed rate that was high enough to completely offset the negative inflation adjustment. The interest rate of all I-Bonds was zero. (underline added)
Good point, Fran. A negative inflation rate doesn't have a 0% floor (as does the SS COLA). If negative, it is still combined with each I Bond's fixed rate to determine the composite rate for the next six months. Only the resulting composite rate has a 0% floor. (See Combining the two rates.) To illustrate, here are the details for the 12 month period May 2009 - May 2010 for two $25 [*] I Bonds: a 3.6% Fixed Rate Bought May 2000 (the largest fixed rate ever issued) and a 0.0% Fixed Rate Bought May 2008 (the smallest possible fixed rate).

Code: Select all

Row                               Col A      Col B     Col C   Formulas in column B
  1  Semi-annual inflation rate  5/2009     (2.78%)
  2  Semi-annual inflation rate 11/2009      1.53% 
  3                              Bought   May 2000  May 2008
  4                          Fixed rate      3.60%     0.00%
  5   Composite rate 5/2009 if no floor     (2.06%)   (5.56%) =ROUND(B$4+2*$B1+B$4*$B1,4)
  6              Composite rate 11/2009      6.72%     3.06%  =ROUND(B$4+2*$B2+B$4*$B2,4)
  7               Value $25 bond 5/2009      44.92     26.24
  8           Value 11/2009 if no floor      44.46     25.51  =ROUND(B7*(1+B5/2),2)
  9            Value 5/2010 if no floor      45.95     25.90  =ROUND(B8*(1+B6/2),2)
 10                 Actual value 5/2010      46.43     26.64
 11     Benefit of composite rate floor       1.0%      2.9%  =B10/B9-1
The last row shows that the 0% composite rate floor feature benefits an I Bond's value more the lower its fixed rate. This is even more evident for the other case of a negative semi-annual inflation rate of -0.80% announced May 2015. In that case the floor feature didn't benefit the 3.6% fixed rate I Bond at all.

Code: Select all

Row                               Col A      Col B     Col C   Formulas in column B
 16  Semi-annual inflation rate  5/2015     (0.80%)
 17  Semi-annual inflation rate 11/2015      0.77% 
 18                              Bought   May 2000  May 2008
 19                          Fixed rate      3.60%     0.00% 
 20   Composite rate 5/2015 if no floor      1.97%    (1.60%) =ROUND(B$19+2*$B16+B$19*$B16,4)
 21              Composite rate 11/2015      5.17%     1.54%  =ROUND(B$19+2*$B17+B$19*$B17,4)
 22               Value $25 bond 5/2015      61.16     29.38
 23           Value 11/2015 if no floor      61.76     29.14  =ROUND(B22*(1+B20/2),2)
 24            Value 5/2016 if no floor      63.36     29.36  =ROUND(B23*(1+B21/2),2)
 25                 Actual value 5/2016      63.36     29.61
 26     Benefit of composite rate floor       0.0%      0.9%  =B25/B24-1
Two other difference between applying inflation to SS benefits and to I Bonds.
  • SS benefits are indexed to the CPI-W while I Bonds (and TIPS) are indexed to the CPI-U. (See Why does BLS provide both the CPI-W and CPI-U?.)
  • SS benefits are indexed annually based on the change versus the prior year of the CPI-W average for July, August, and September. The increase is applied the following January. The I Bond inflation rate changes every six months and equals the the CPI-U change in the preceding September to March and March to September periods. It is applied starting each May and November as each I Bond reaches its 6 month anniversary. (See When does my bond change rates?.)
* I'm using a $25 I Bond since its value is rounded to the nearest penny and all other denominations are a multiple. E.g., a $10,000 I Bond's value will be exactly 400 times that of a $25 denomination's value.
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Re: 4.7% SS COLA?

Post by pahkcah »

CPI-W for May 2021 was announced this morning as an increase of 0.91%. With 4 months (June, July, August, and September) to go, the SS and Federal pension COLA currently stands at 4.03%.
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Re: 4.7% SS COLA?

Post by pshonore »

pahkcah wrote: Thu Jun 10, 2021 9:15 am CPI-W for May 2021 was announced this morning as an increase of 0.91%. With 4 months (June, July, August, and September) to go, the SS and Federal pension COLA currently stands at 4.03%.
I get 3.10% comparing Mar, April, May 21 (avg 261.291) against Jul, Aug, Sept 2020 (avg 253.412)
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Re: 4.7% SS COLA?

Post by vested1 »

pshonore wrote: Thu Jun 10, 2021 9:27 am
pahkcah wrote: Thu Jun 10, 2021 9:15 am CPI-W for May 2021 was announced this morning as an increase of 0.91%. With 4 months (June, July, August, and September) to go, the SS and Federal pension COLA currently stands at 4.03%.
I get 3.10% comparing Mar, April, May 21 (avg 261.291) against Jul, Aug, Sept 2020 (avg 253.412)
https://www.narfe.org/legislation/?fa=v ... le&id=2588
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Re: 4.7% SS COLA?

Post by Elric »

Those taking the over may make out, as May's inflation rate just came in even higher: https://www.usnews.com/news/economy/art ... nd-the-fed

Whether this is a transitory post-pandemic effect or a sustained trend is unknown.

Question: if this make people more likely to expect the Fed to raise interest rates down the road,.what does that do to near-term sales of new treasuries?
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Re: 4.7% SS COLA?

Post by Alan S. »

If you assume that the .9 monthly increase for the last 2 months will continue through the 3rd quarter, the 2022 COLA would be closer to 6.8%.

And with wage inflation now spiking due to 9.3mm of unfilled jobs, it is more likely that this will further accelerate the increases a couple months down the road. Shortages in raw materials coupled with wage inflation make for a very inflationary combo.

Employers will not only be forced to raise wages, they will also be forced into doing considerable training since the available wage pool tends to fall short on the skills needed for today's jobs. This all results in reduced productivity gains. Further, all the state level increases in paid time off will have a factor as the various laws kick in.

You might also factor in the reluctance of the fed to raise rates, unlike their response in typical inflationary cycles.

But don't spend it yet! :wink:
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Re: 4.7% SS COLA?

Post by pahkcah »

vested1 wrote: Thu Jun 10, 2021 9:37 am
pshonore wrote: Thu Jun 10, 2021 9:27 am
pahkcah wrote: Thu Jun 10, 2021 9:15 am CPI-W for May 2021 was announced this morning as an increase of 0.91%. With 4 months (June, July, August, and September) to go, the SS and Federal pension COLA currently stands at 4.03%.
I get 3.10% comparing Mar, April, May 21 (avg 261.291) against Jul, Aug, Sept 2020 (avg 253.412)
https://www.narfe.org/legislation/?fa=v ... le&id=2588
Thank you! I had included the NARFE link in a response in May. Instead of providing the link today, I tried to copy in the full chart but had issues with formatting and gave up after 15 minutes.

I retired in May of 2008 from the Federal Government. The COLA impacts my pension as well as the monthly Social Security payment. Highest COLA since retirement was the next year, 2009, when it hit 5.8%. The average since retirement has been 1.71%, which included three years of zero increase. I know there can be bad consequences with higher inflation, but this year's numbers (so far) are helping to ease the conscious sting of the no/little increase years.
vested1
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Re: 4.7% SS COLA?

Post by vested1 »

pahkcah wrote: Thu Jun 10, 2021 2:29 pm
vested1 wrote: Thu Jun 10, 2021 9:37 am
pshonore wrote: Thu Jun 10, 2021 9:27 am
pahkcah wrote: Thu Jun 10, 2021 9:15 am CPI-W for May 2021 was announced this morning as an increase of 0.91%. With 4 months (June, July, August, and September) to go, the SS and Federal pension COLA currently stands at 4.03%.
I get 3.10% comparing Mar, April, May 21 (avg 261.291) against Jul, Aug, Sept 2020 (avg 253.412)
https://www.narfe.org/legislation/?fa=v ... le&id=2588
Thank you! I had included the NARFE link in a response in May. Instead of providing the link today, I tried to copy in the full chart but had issues with formatting and gave up after 15 minutes.

I retired in May of 2008 from the Federal Government. The COLA impacts my pension as well as the monthly Social Security payment. Highest COLA since retirement was the next year, 2009, when it hit 5.8%. The average since retirement has been 1.71%, which included three years of zero increase. I know there can be bad consequences with higher inflation, but this year's numbers (so far) are helping to ease the conscious sting of the no/little increase years.
I'm currently trying to decide whether to continue to delay my claim until age 70 in July of 2022 or claim at 69.5 in January of 2022. I did a conservative estimate of what my age 70 benefit would be at retirement in early 2016, and have been pleasantly surprised by the additional growth due to COLA. I don't see the pace of inflation for CPI-W dropping off a cliff before September, not that I would know, but the COLA raise will likely be more than the additional 4% bump for waiting another 6 months from January until July.

My brother thinks I'm crazy for delaying this long, but that may be due to the fact that he filed at FRA.

Personal finances make claiming 6 months early tempting because we leased a new car, (I know, I know), and the three year term is up in January. We plan on buying the car because we love it. We leased to help keep a lid on expenses due to the delay in SS, and my projections, which assumed zero SS COLA since we retired have of course made the eventual benefit even better. We have great credit but keep income down to a reasonable level, so a car purchase loan should be interesting.

The difference in my SS benefit would be about $120 a month for waiting that additional 6 months, so I have some thinking, and probably a good amount of mental gymnastics in the near future to justify my impending decision. I may fall victim to unreasonable pride at holding out until I wring the greatest amount possible from SS, shooting myself in the foot in the process. I'm currently receiving 1/2 of my wife's PIA until I file for my own benefit.
vested1
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Re: 4.7% SS COLA?

Post by vested1 »

Here's another interesting link that shows the history of SS COLA increases.

https://www.ssa.gov/cola/

14.3% in 1980, (and likely 14.2 in Medicare Part B).
trueblueky
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Re: 4.7% SS COLA?

Post by trueblueky »

Elric wrote: Thu Jun 10, 2021 10:17 am Those taking the over may make out, as May's inflation rate just came in even higher: https://www.usnews.com/news/economy/art ... nd-the-fed

Whether this is a transitory post-pandemic effect or a sustained trend is unknown.
My thoughts:

Some of the increase in food prices reflects shutdown of meat packing plants early in the pandemic. Additionally, industry had to adjust the proportion of its packaging from "for restaurant use" to "for home use" and now is adjusting back. This has caused hiccups, so that, even now, shelves are not as filled.

The lumber situation will resolve.

Used car prices are up because of supply chain issues for new car assembly plants. This will resolve.

People still have childcare issues related to the pandemic. The end of the school year will resolve some of that.

Wages were already going up. Some from corporate action. Some from changes in state and local minimum wage laws. This is likely permanent.

Overall, I think is transitory.
RCL
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Re: 4.7% SS COLA?

Post by RCL »

Quick question,
When estimating what effect the SS cola has on one's SS, is it based on the amount we were due at FRA or any amount due after the increases due to delaying?
example: if FRA SS benefit is a $1000/month and you delayed 2 years (approx +16%) for a benefit of 1160/month; if cola was 3%, what would your new monthly benefit be?
Thanks
trueblueky
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Re: 4.7% SS COLA?

Post by trueblueky »

RCL wrote: Thu Jun 10, 2021 5:35 pm Quick question,
When estimating what effect the SS cola has on one's SS, is it based on the amount we were due at FRA or any amount due after the increases due to delaying?
example: if FRA SS benefit is a $1000/month and you delayed 2 years (approx +16%) for a benefit of 1160/month; if cola was 3%, what would your new monthly benefit be?
Thanks
It is based on your current monthly amount unless you started in the last year, in which case, it's apportioned.

$1160 * 1.03 = $1194.80
stocknoob4111
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Re: 4.7% SS COLA?

Post by stocknoob4111 »

CABob wrote: Sat May 15, 2021 10:13 am According to this link there might be a 4.7% adjustment to Social Security benefits next year. Sounds like a good news/bad news issue reflecting actual costs that will be experienced.
I wish there is a 4.7% SS COLA, that way people can use it to prove to their cheapskate employers the proper inflation rate and get the appropriate raise based on that and not their fantasyland estimation of inflation.

Last year my employer gave me a 1.5% raise, granted I was only there for half a year, but then 3% annualized, bet you they are going to try to give me a 2-3% raise next year BUT guess what... my rent is slated to go up by 20% :shock: My lease is up in November but based on what they are asking for existing vacancies...it's absolutely shocking. Real inflation including housing is more like 10% in my view.
RCL
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Re: 4.7% SS COLA?

Post by RCL »

trueblueky wrote: Thu Jun 10, 2021 5:59 pm
RCL wrote: Thu Jun 10, 2021 5:35 pm Quick question,
When estimating what effect the SS cola has on one's SS, is it based on the amount we were due at FRA or any amount due after the increases due to delaying?
example: if FRA SS benefit is a $1000/month and you delayed 2 years (approx +16%) for a benefit of 1160/month; if cola was 3%, what would your new monthly benefit be?
Thanks
It is based on your current monthly amount unless you started in the last year, in which case, it's apportioned.

$1160 * 1.03 = $1194.80
Thank you, just doing some estimates for 2022 incomes
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Electron
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Re: 4.7% SS COLA?

Post by Electron »

Here is the CPI-W data this year through May.

255.296, 256.843, 258.935, 261.237, 263.612

If the current value remains unchanged through September, the COLA would be 4.00%.
Electron
cbeck
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Re: 4.7% SS COLA?

Post by cbeck »

My guess is that the COLA for 2022 will be less than 2%.

From Paul Krugman's current column in the Times:

But the Fed’s view has been that this episode, like the inflation blip of 2010-11, will soon be over.
And it’s now looking as if the Fed was right. Lumber prices have plunged in recent weeks. Prices of industrial metals like copper are coming down. Prices of used cars are still very high, but their surge has stalled and they may have peaked. Core inflation wins again.


https://www.nytimes.com/2021/06/21/opin ... n-fed.html
trueblueky
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Re: 4.7% SS COLA?

Post by trueblueky »

cbeck wrote: Mon Jun 21, 2021 10:55 pm My guess is that the COLA for 2022 will be less than 2%.

From Paul Krugman's current column in the Times:

But the Fed’s view has been that this episode, like the inflation blip of 2010-11, will soon be over.
And it’s now looking as if the Fed was right. Lumber prices have plunged in recent weeks. Prices of industrial metals like copper are coming down. Prices of used cars are still very high, but their surge has stalled and they may have peaked. Core inflation wins again.


https://www.nytimes.com/2021/06/21/opin ... n-fed.html
It's sitting at 4.0% now. Assume straight line for June - September, it would need to go down 0.67% per month. (Because it is based on the average of July, August, September, it would need to decline by more than 2% in four months, again assuming straight-line). We will see.
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JoeRetire
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Re: 4.7% SS COLA?

Post by JoeRetire »

wolf359 wrote: Sun May 16, 2021 5:25 am 1) If the COLA works as advertised, then your buying power should stay substantially the same. A large or a small COLA should not make any effective difference in your standard of living, because it's supposed to track with your actual expenses.
Not quite. COLAs track with CPI-W. That may or may not have anything to do with your own actual expenses.
2) The COLA is set to the wrong benchmark. It does not track expenses for retired senior citizens accurately, and therefore helps less and less each year.
That what some argue.
From this, I concluded that Social Security is best kept as longevity insurnce, a stream of income to be invoked as late as possible, to make it as large as possible. It shouldn't be used as your sole income stream if you can help it. It is best used to prevent you from depleting your investments.
That's a personal choice. For some that makes sense. For others, not as much.
Just remember: it's not a lie if you believe it.
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JoeRetire
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Re: 4.7% SS COLA?

Post by JoeRetire »

vested1 wrote: Thu Jun 10, 2021 4:07 pmI don't see the pace of inflation for CPI-W dropping off a cliff before September, not that I would know, but the COLA raise will likely be more than the additional 4% bump for waiting another 6 months from January until July.
You realize that COLA and "the additional 4% bump" aren't mutually exclusive, right?
- If you delay you get both the COLA and the bump.
- If you start at 69.5, you still get the COLA.
The difference in my SS benefit would be about $120 a month for waiting that additional 6 months
For the rest of your life...
And potentially, for the rest of your spouse's life in some situations...
Just remember: it's not a lie if you believe it.
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