Seniors may be rooting for a high inflation print on October 13 because the COLA for 2023 would be partially based on the September CPI-W. This would result in a more considerable Social Security increase the following year. They ought to probably be anticipating the reverse, though. This is because seniors are not intended to “benefit” from the boost. After all, the COLA is based on cost-of-living increases.
The COLA will be enormous if inflation is high & smaller if inflation is lower than expected. It’s a zero-sum game. Of course, the inflation rate varies from person to person depending on factors like whether you own or rent your house, where you reside, how frequently you travel and dine out, and more.
Cost-of-living increases: Benefits and Drawbacks
Seniors on fixed incomes have had a challenging year because of the most extraordinary inflation the American economy has seen since the 1980s. While working population wages have increased, the past year has probably been challenging for retirees. The date October 13 has been highlighted on so many retirees’ calendars because of this.
The last information needed to calculate the Social Security COLA for the following year is the inflation data for September (COLA). The Social Security Administration released the September 2021 CPI report and the 2022 COLA on the same day last year.
Be cautious with your wishes
.Even though inflation and COLA will always be a “wash,” regardless of the inflation print, this year’s turbulence in the financial markets has been caused by continuing high inflation. 2022 has already been an exceptionally unusual year in which the values of both equities and bonds have fallen precipitously. If you’re older, you probably have some of each. As long as the bonds don’t have a default risk, fixed coupon bonds typically rise in price to reflect the current lower-rate regime as interest rates drop.
However, seniors typically invest in Treasuries or corporate bonds with low default risk (or they should). Continuing inflation in 2022 has resulted in generally rising interest rates, which has been detrimental to both stocks and bonds. Bond prices have decreased due to rising rates that reflect the new, more significant inflation, and stock prices have fallen due to declining P/E ratios.
Even while Social Security recipients may be hoping for another steamy inflation print on October 13 to receive a higher 2023 COLA, the adverse effects of high inflation would probably outweigh the positive ones, reports Fool.
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