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Social security 2020 COLA will increase so much, new report predicts

Every month, more than 63 million people &#821 1; 70% of them retired workers – have received benefits from the Social Security Agency. For a large majority of these people, the second week of October tends to give one of the year's most important announcements. After that, the Social Insurance Agency then publishes inflation data from the Bureau of Labor Statistics on the cost of living adjustment (COLA) for the coming year. Think of COLA as "raising" the recipients to receive 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 count on their benefit for at least half of their income, this increase can be quite important to determine if they can end. An elderly man counts a haunted pile of money in his hands. More Image Source: Getty Images. <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 a raise can social security recipients expect in 2020? So, how big a COLA should the recipients expect by 2020? While most analysts do not yet have the guesses that I will come a little later, a newly released report offers that it records how big an upturn could lead the way for 63 million Americans next year. In April, the Annual Social…

Every month, more than 63 million people &#821

1; 70% of them retired workers – have received benefits from the Social Security Agency. For a large majority of these people, the second week of October tends to give one of the year’s most important announcements. After that, the Social Insurance Agency then publishes inflation data from the Bureau of Labor Statistics on the cost of living adjustment (COLA) for the coming year.

Think of COLA as “raising” the recipients to receive 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 count on their benefit for at least half of their income, this increase can be quite important to determine if they can end.

An elderly man counts a haunted pile of money in his hands.

Image Source: Getty Images. <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 a raise can social security recipients expect in 2020?

So, how big a COLA should the recipients expect by 2020? While most analysts do not yet have the guesses that I will come a little later, a newly released report offers that it records how big an upturn could lead the way for 63 million Americans next year.

In April, the Annual Social Security Trustees report was released. Although this report is primarily designed to give legislators and the public a short-term (10-year) and long-term (75-year) view of the program and its many variables, one aspect that tends to go virtually unnoticed is the Trustees also provide a under-radar inspiration 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 in its 260-page report more than than the managers provide a history of all previous COLAs dating back to 1975, which is when COLA annually ties to the consumer price index of urban officials (CPI-W), before 1975, profit improvements were transferred due to inflation arbitrary with special congressional votes, a number of short-term forecasts in the program, by 2028. “data-reactid =” 37 “> On page 115 of the report, more than 260 pages, the managers provide a history of all previous COLAs dating back to 1975 which is when COLA annually ties to the consumer price index for Urban Wage Earners and Clerical Workers (CPI-W). Before 1975, profit improvements due to inflation were arbitrarily transferred with special votes from Congress. On this page there are also a number of short-term forecasts in the program, up to 2028.

<p class = “canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – -sm” type = “text” content = “Although the managers continue to foresee an average COLA of 2.6% in their short-term mid-range model, forecasters also foresee a COLA of 1.8% by 2019 for the 2020 year. The average pensioner which takes home SEK 1,477.17 in March 2019, a 1.8% COLA would mean an increase of $ 26.41 per month or nearly $ 317 for the full year. “data-reaction time =” 38 “> Although the managers continue to forecast an average COLA of 2.6% in its short-term mid-range model, forecasters also predict a COLA of 1.8% in 2019 for the 2020 year. With the average pensioner taking home SEK 1,477.17 in March 2019, a 1.8% COLA would mean an increase of $ 26.41 per month, or nearly $ 317 for the full year.

Two social cards lying on top of a haunted pile of money. ” class=”Maw(100%)” src=”https://s.yimg.com/ny/api/res/1.2/i_HXefLjx_nKPFK9kybYcA–~A/YXBwaWQ9aGlnaGxhbmRlcjtzbT0xO3c9ODAw/http://media.zenfs.com/en-US/homerun/motleyfool.com/4765b3e84316dcd03c2a65ea97c40581″ itemprop=”url”/>

Two social cards lying on top of a haunted pile of money.

Image Source: Getty Images.

h2 class = “canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm” type = “text” content = ” Before becoming too excited, keep this “data-reactid =” 64 “> Before you get too excited, remember this

Considering that KPI-W has registered three years of deflation (ie falling prices) over the past decade – A year-on-year fall in prices will result in profits remaining in 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 excited, there is one important fact to remember: namely, that we did not even reach the months that actually play a role in the COLA calculation (which is why most analysts have not chimed in with a forecast yet). Reaktid = “66”> But before you get too excited, there is an important fact to keep in mind: namely that we have not even achieved the months that actually play a role in the COLA calculation (why most analysts end up “t chimed in with a forecast yet.]

You see, the average CPI-W reading from the third quarter (July to September) is all that matters for the social insurance COLA calculation, while the remaining nine months do not matter. July may warn us of trends that may affect inflation below t the quarter, but CPI-W readings between October and June are simply not a factor in the bottom line’s COLA calculation. Since we have not yet reached these months, 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.

Image Source: Getty Images.

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

<p class =” canvas-atom canvas-text Mb) It’s also worth point out that while COLA is of vital importance to aging Americans, it is also a completely erroneous calculation without any simple fix. “data-reactid =” 90 “> It is also worth pointing out that while COLA is vital importance to aging Americans, it is also a blatantly incorrect calculation without any simple fix.

<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 expenditure for urban and office workers, almost none of whom receive benefits from the social security program, while at the same time ignoring elderly care habits, which make up 70% of the programme’s recipients, are important expenses for seniors, such as healthcare and housing, often underweight, while less important costs such as education, clothing and transport, which are important for urban and office workers, get a higher weight, in summary, the purchasing power of the social security dollar continues to decline for most retirees, quite regardless of the COLA they receive each year. “data-response =” 91 “> As the name suggests, the KPI-W analyzes spending on urban and office workers, and almost none of them receive benefits from the social security program. At the same time, one ignores the elderly care habits, which make up 70% of the programme’s beneficiaries. As a result, important expenses for seniors, such as healthcare and housing, are often underweight, while less important costs, such as education, clothing and transportation, are important for urban and office workers. Overall, the purchasing power of social security dollars continues to decline for most pensioners, roughly independent of COLA as 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 that has been claimed by Democrats is the idea of ​​switching to the consumer price index for the elderly (CPI-E) instead of the CPI-W. As the name suggests, the CPI-E would only be a factor in household spending habits with people aged 62 and thus more accurately representing the medical and housing costs of older Americans unfortunately, the CPI -E has no support from the Republicans whose votes would be needed to change the social security inflation ties in the Senate. “data-reactid =” 92 “> A possible solution that has been preached by Democrats is the idea to switch to consumer price index for the elderly (KPI-E) instead of KPI-W. As the name suggests, KPI-E would only be a factor in household spending habits with people aged 62, thus more clearly representing the medical and housing costs faced by older Americans. Unfortunately, the CPI-E has no support from the Republicans, whose votes would be needed to change the social security inflation ban in the Senate.

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

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

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