As companies struggle with COVID-related shortages of supplies and workers, inflation is soaring at rates not seen in years. Steeper prices for gasoline, food, cars and many other things are squeezing Americans, especially older people living on fixed, often modest incomes.
But the inflation spike is likely to provide seniors with their biggest Social Security raise in almost four decades. The government this week is expected to announce Social Security's 2022 cost of living adjustment, or COLA, which will affect 55 million retirees, their dependents and survivors.
Seniors are now scrambling to find ways to save money, as inflation takes its toll. Will the supersize Social Security increase advocates are predicting even be enough?
2022 COLA could be the biggest since 1983
Based on how inflation ran during 2020, Social Security's cost of living adjustment for this year, which began affecting payments in January, was 1.3%. It raised benefit checks by an average $20, according to the nonpartisan advocacy group The Senior Citizens League.
That increase has been gobbled up by price hikes in 2021.
The COLA for 2022 could be far greater — as high as 6.1%, the league says. The size is determined by the government's inflation numbers from the third quarter, meaning July, August and September. The September data is due for release on Wednesday, and that will allow Social Security to make its big announcement.
If the advocates are right, Social Security checks next year will see their biggest increase since 1983, when the COLA was 7.4%.
But a 6.1% increase in this year's average monthly benefit of $1,555 would give a retiree about $1,650 per month. That's $95 more — hardly a windfall. And Mary Johnson, a policy analyst with The Senior Citizens League, says some Social Security recipients could see cuts in other benefits because of their larger checks.
“Higher income could lead to trims in food stamps, rental assistance or Medicare Extra Help, which covers most prescription drug costs," Johnson tells MoneyWise.
Group says seniors need a stimulus check too
The Senior Citizens League says older Americans can't want for the larger Social Security COLA to take effect in January. The group is calling on Congress to provide seniors with an immediate income boost — in the form of emergency $1,400 stimulus checks for people on Social Security.
A petition drive launched in early September has already gathered more than 38,000 signatures in favor of a direct payment to help the elderly cope with painful increases in prices.
Those have included a 48% surge in gasoline costs over the last year and a 39% jump in home heating oil, according to research from the senior group.
"We’ve heard from thousands of [seniors] who have exhausted their retirement savings, who have started eating just one meal a day, started cutting their pills in half because they can’t afford their prescription drugs," writes Senior Citizens League chairman Rick Delaney, in a letter sent to every member of Congress.
Though The Senior Citizens League boasts more than a million supporters, there’s a good chance its petition will be ignored by lawmakers, who are focusing on other matters including infrastructure spending and just keeping the government's bills paid.
A different petition calling for regular $2,000 checks for all Americans has drawn more than 2.9 million signatures — but little, if any, attention from Congress.
How Americans can fight back against inflation
A new stimulus check for seniors might very well never happen, and the new Social Security COLA won't arrive for months — and may not go far enough. So while prices are skyrocketing, there are several things all Americans, including seniors, can do to ease some of the budget-battering effects of inflation.
Deal with your debt. Credit cards have helped many households get through the last year, but the expensive interest will only make life harder going forward. Folding your balances into a single debt consolidation loan can cut the cost of your debt and help you pay it off faster.
Refinance your home. If you own a home and are still making payments on your mortgage, it's a good time to refinance and slash your monthly payment. Thirty-year mortgage rates have slipped below 3% again, and a new loan might easily save you hundreds of dollars per month. Nearly half the homeowners who refinanced over the year that ended in April are now saving at least $300 each month, a Zillow survey found.
Save when you shop. Take advantage of every bargain online, and don't overpay. You might download a handy browser extension that hunts for lower prices and instantly provides the promo codes websites ask for during checkout.
A few wise investments also can help ward off the effects of rising costs.
Put some money into farming. Farmland can be a good hedge against inflation — because everybody's got to eat, right? New are platforms are helping investors tap into this long-overlooked asset class.
Turn your pennies into a portfolio. If you've never waded into the stock market before, you can start small. A popular app lets you invest in a diversified portfolio using little more than "spare change" from your everyday purchases.
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.