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Social security 2020 KOLA will increase this, new report assumes




Every month, over 63 million people ̵[ads1]1; 70% of them retired workers – have benefited from the Social Security Administration. For the vast majority of these people, the second week of October has one of the most important announcements this year. That's when, after the September issue of inflation data from the Bureau of Labor Statistics, the Social Security Administration announces the cost of living (COLA) for the coming year.

Think of COLA as "raising" the recipients each year to take into account the rising price of goods and services they collectively face. Since more than three out of five retired workers expect their benefit to be at least half of their income, this increase can be quite important to determine if they can make ends meet.

An older man counts a real bunch of money in his hands.

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<h2 class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " How much of a raise can social security recipients expect by 2020? "data-response time =" 34 "> How much of an increase can social security recipients expect in 2020?

So how big a COLA should the recipients expect in 2020? While most analysts have yet to offer a guess for reasons, I will come a little later, a newly released report offers to take on how big an increase could be on 63 million Americans next year.

In April, the Annual Report on Social Security Trustees was released. Although this report is primarily designed to provide legislators and audiences briefly (10 years) and long-term (75 years) views of the program and its many variables, one aspect that tends to go largely unnoticed is that Trustees also provide radar perspective on what they think COLA will be in the short term.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "On page 115 of its more than than [ 260-page report gives Trustees a story about all previous COLAs, dating back to 1975, which is when COLA was tied annually to the consumer price index of city dwellers and office workers (KPI-W). adopted by special congressional votes, this page also shows a number of short-term projections in the program, through 2028. "data-response time =" 37 "> On page 115 of the report, more than 260 pages provide managers with a history of all previous COLAs that go back to 1975, which is when COLA was bound annually to the consumer price index of Urban Wage Earners and Clerical Workers (KPI-W). Before 1975, performance increases due to inflation were arbitrary by special votes from Congress. This page also shows a number of short-term projections in the program, through 2028.

<p class = "canvas-atom clay text Mb (1.0em) Mb (0) – sm Mt (0.8em) – -sm" type = "text "content =" Although the managers continue to predict an average COLA of 2.6% in their short-term cost model, the forecasters also foresee a COLA of 1.8% by 2019 for the 2020 year. average retired employee home $ 1,467.17 in March 2019, a 1.8% COLA would mean an increase of $ 26.41 a month, or nearly $ 317 for the whole year. "data-reactid =" 38 "> Although managers continue to predict an average COLA of 2.6% in its short-term cost model, forecasters also predict a COLA of 1.8% in 2019 for the 2020 year. With the average retirement worker coming home to $ 1467.17 in March 2019, a 1.8% COLA would mean an increase of $ 26.41 a month, or nearly $ 317 for the whole year.

Two social insurance cards are on top of a real bunch of money.

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h2 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Before you become too excited, keep this "data-reactid =" 64 "> Before you get too busy, please note this

When KPI-W has registered three years of deflation (ie falling prices) over the past decade – a year-on-year decline in prices means that the benefits remain flat over the following year – an increase of 1.8% by 2020 would actually be the fourth largest increase over the past 11 years.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "But before you get too busy, it is important to remember: namely, that we haven't even reached the months that actually matter to the COLA calculation (that's why most analysts haven't yet chimed in with a prediction yet). "data-response time =" 66 "> But before you get too busy, it's important to keep in mind: we haven't even reached the months that actually matter to the COLA calculation (that's why most analysts have" You've seen the average KPI-W reading from the third quarter (July to September) is all that matters to the social security COLA calculation, while the remaining nine months do not matter, sure that the months up to July can alert us to trends that may affect inflation in third quarter, but the KPI-W readings between October and June are simply not a factor in the bottom line's COLA bears Since we have not yet reached the months yet, and the Trustees report is often prepared well in advance of the third quarter, the accuracy of its prediction is questionable.

  A visibly annoyed elderly man with a scowl on his face. </span></button></div>
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<p class= A visibly annoyed elderly man with a scowl on his face. ” class=”Maw(100%)” src=”https://s.yimg.com/ny/api/res/1.2/k34kLyXRdP8ZzaA9pjRmoQ–~A/YXBwaWQ9aGlnaGxhbmRlcjtzbT0xO3c9ODAw/http://media.zenfs.com/en-US/homerun/motleyfool.com/f79fae3a0f5686bb526e6031b07bf6cc” itemprop=”url”/>

A visibly annoyed senior man with a scowl on his face.

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<h2 class = "canvas -atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Whatever 2020 COLA, you want probably not happy "data-reactid =" 89 "> Regardless of 2020 COLA, you probably won't be happy

<p class =" canvas-atom canvas text Mb (1.0em) It's also worth to point out that while COLA is of vital importance to aged Americans, there is also an obviously incorrect calculation without simple solution. "data-response time =" 90 "> It is also worth pointing out that while COLA is crucial For the older Americans, there is also a blatant error calculation with no simple solution.

<p class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "As the name suggests, KPI-W analyzes the spending habits For city and office workers, almost none of whom receive benefits from the social security program, meanwhile, ignoring the elderly spending amounting to 70% of program recipients, and as a result, important expenditures for the elderly, such as medical care and housing, are often underweight while less important Costs, such as education, clothing, and transportation, which are important to urban and office workers, are given a higher weight, overall, the purchasing power of social security continues to fall to most retired workers, quite a lot, regardless of the COLA they receive every year. "data-reactid =" 91 "> As the name suggests, the KPI-W analyzes the spending habits of city and office workers, almost none of which receive benefits from the social security program. Meanwhile, they ignore the spending of the elderly, which accounts for 70% of the program recipients. As a result, important expenses for the elderly, such as medical care and housing, are often underweight, while less important costs, such as education, clothing, and transportation, which are important to urban and office workers, are given greater weight. Overall, the purchasing power of social security dollars continues to fall for most retirees, quite a lot, regardless of the COLA they receive each year.

<p class = "canvas-atom canvas text Mb (1.0em) Mb 0) – sm Mt (0.8em) – sm" type = "text" content = "A possible solution asked by the Democrats is the idea of switch to the Consumer Price Index for the Elderly (CPI-E) instead of the CPI-W. As the name suggests, KPI-E will only be a factor in household spending habits with people aged 62 and over, thus representing more accurately the medical and housing costs that The Americans are facing. Unfortunately, the CPI-E has no support from the Republicans whose votes would be needed to change the social security inflationary idea of ​​the Senate. "data-reactid =" 92 "> A possible solution asked by Democrats are the idea of ​​switching to the consumer price index for the elderly (KPI-E) instead of the KPI-W. As the name suggests, KPI-E will only be a factor in household spending habits with people aged 62 and over, thus more accurately representing the medical and housing costs faced by older Americans. Unfortunately, the CPI-E has no support from Republicans, whose votes would be necessary to change the social security inflationary idea of ​​the Senate.

This means that we are stuck with KPI-W for the foreseeable future, which means continued loss of purchasing power is very likely no matter what the raise is in the cards for 2020.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – Sm Mt (0.8em) – sm "type =" text "content =" More from The Motley Fool "data-reactid =" 94 "> More from The Motley Fool

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