Inflation spike and the Social Security COLA
Alicia Munnell says it plainly– the size of the cost of living adjustment (COLA) shouldn’t matter if purchasing power is maintained. If inflation is 5% and folks get a 5% raise or if it’s 2% and they get a 2% raise, everyone retains the same purchasing power. That is, their buying power has remained constant. Thus there is no reason for seniors (or anyone else) to get giddy that a bigger than usual raise might be forthcoming. At this juncture we don’t know whether the jump is a short-term spike as we emerge from the pandemic or an indication of more permanent inflationary pressures. Still, it will most likely lead to higher Social Security benefits come January 2022. The question is how much higher. Munnell’s full article is here.