INSURANCE AGENCY NETWORK Blog
Social Security benefits are adjusted every year based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The formula is supposed to help retirees maintain their standard of living. The CPI-W increased 2.8% in 2017, the largest increase since 2012.
The cost of living is rising, and wages aren't keeping pace. If you don't have a plan to save for retirement, you could be in trouble. Start planning now so you can enjoy your golden years without financial worries.
Cost of Living Adjustment
This change is good news for seniors who are concerned about the rising cost of living. The CPI-E is calculated using older households with lower incomes, so they are more likely to benefit from this adjustment than younger households.
This change also means that seniors will receive a higher Social Security payment every year.
A Spike in Inflation
The Senior Citizen League predicts a 6% to 6.1% cost-of-living adjustment next year. It is because of a COVID-19-related spike in inflation. The 68 million people who rely on Social Security benefits will be impacted by this and the 521,000 recipients who were just awarded higher monthly payments.
Inflation Rate Spike
Employees are changing jobs more often than ever before. Employees who change jobs are more likely to leave the company than stay. Employees may be going because they can't find a better match for their skills or are looking for opportunities to grow.
Either way, this creates an urgent need for employers to offer pay raises that keep pace with inflation.
Gasoline and Transportation
The Cost-of-living-adjustment (COLA) estimate for next year is high. Still, it's mostly due to higher gasoline and transportation costs. These more volatile measures of inflation have pushed up the CPI, which increased by 1.8% in September.
The cost of living doesn't directly drive the COLA formula, but it will impact the number.
The CPI data is based on the Bureau of Labor Statistics consumer price index, which tracks the cost to buy a representative basket of goods and services. The CPI increased 1.7% in 2018, which is the largest since 2014. This increase has been attributed to rising education, housing, transportation, healthcare, and food prices.
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