No, it is not your imagination. The cost of many goods and services has risen over the past year, and some of those price hikes are significant. Most household budgets have been impacted, and the measures of inflation are indeed reflecting this reality.
For example, the cost of gas increased over 56 percent from May 2020 to May 2021. Unsurprisingly, the rising cost of transportation then impacted food prices. A gallon of milk now costs about 7 percent more than it did last year, bacon is up by 13 percent, and you’ll pay about 9 percent more for citrus fruits. Those are just a few common examples.
The Consumer Price Index demonstrates that, while prices did actually decrease on some items, overall we are seeing significant inflation this year.
Cost of living adjustments (COLA) of Social Security checks are also based upon the Consumer Price Index. That’s why many experts are predicting a larger-than-usual increase for monthly benefits.
Based on data from January through April of this year, the nonpartisan Senior Citizens League estimated a COLA of 4.7 percent beginning in January 2022. They have since revised that estimate upwards, based on new data from the CPI in recent months, to 5.6 percent.
For now, these predictions are just guesses, although they are calculated by experts based upon the same data used by Social Security to determine cost of living adjustments. So we can’t count on anything just yet. The takeaway message is that yes, inflation has increased significantly this year, and yes, Social Security is likely to issue an upward adjustment to beneficiary checks. But we can’t be sure of the exact amount just yet.
In the meantime, we should all remember that Social Security was never meant to completely fund retirement. The program was designed as supplementary income only, and we should all plan carefully for a retirement income that adjusts to inflation and lasts for the duration of our retirement years.
For more help on that point, give us a call. Whether or not Social Security continues to issue COLAs each year, we can help you design a retirement income plan that keeps pace with your cost of living.