Nationwide, there has been a surge in coronavirus cases. In fact, some public health experts warn that we may have seen the second wave, while others believe that the first wave has never ended.
This is obviously terrible news, because it means that thousands of people may get sick or even die. For the economy, this is also bad news, because the states have begun to reopen the reverse route, and companies have been closed. However, although the consequences of the second wave may be detrimental to everyone, if the second wave occurs now, social security beneficiaries are particularly at risk of long-term financial consequences.
This is because this quarter is the key to deciding whether revenue will increase in the next year.
The second wave means that consumer spending will decline at a critical moment
To understand if a second wave of COVID-19 appears now or in the near future, why social security beneficiaries will face huge financial consequences, you need to understand how the cost of living adjustment (COLA) works.
The beneficiaries of social security receive an adjustment to their living expenses once a year to improve their welfare and help them keep up with the pace of inflation. But they can only get it when prices rise. To determine whether this is happening, the Social Security Administration (SSA) has studied urban wage income and the consumer price index (CPI-W) of civilian staff.
Specifically, SSA compares CPI-W in the third quarter of the year with CPI-W in the third quarter of the previous year. This means they will study prices in July, August and September this year compared to last year.
Unfortunately, because the country is already in recession, if the second corona virus outbreak, the economic difficulties may become worse, so prices are likely to fall compared to last year. After all, if people are locked in their homes, worrying about getting a virus and worrying about not going out to work, consumers’ demand for many important items on CPI-W may be very low. Already working.
If there is no increase in CPI-W this quarter, there will be no cost of living adjustment. For many elderly people, this is a big problem. With an average monthly social security benefit of only US$1,503, these benefits are no longer sufficient to maintain a livelihood. CPI-W is actually not a very accurate measure of inflation that the elderly spend the most, so social security benefits have lost considerable purchasing power.
If there is no Coke this year, then the elderly may see their purchasing power decline further. And because all future salary increases are based on a certain percentage increase in current earnings, this effect will be long-term.
Next year need to prepare for social security retirees without COLA
Since the elderly are likely not to raise their salaries next year, fixed-income retirees should now start planning for this possibility.
This may mean budget cuts now, so if your spending capacity declines next year, you are ready, so if you face a shortage, you can save some extra cash. In addition, make sure that you know how much money can be safely withdrawn from the investment account, because you do not want to use too much money to make up for too small social security benefits, only to find that your account is insufficient during operation. Still rely on them.
Future retirees should also realize that COVID-19 may have an adverse long-term impact on social security for a variety of reasons, and should plan to save some additional expenses for retirement, because these benefits are likely to be more than expected Be young when they leave the world of work.