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KC economist: Social Security increase offsets hike in living costs

marc economist
Posted at 4:43 PM, Oct 13, 2021
and last updated 2021-10-13 19:17:40-04

KANSAS CITY, Mo.  — The Social Security Administration announced on Wednesday recipients will get a 5.9% increase next year to offset rising cost of living prices.

It's the largest cost of living adjustment since 1982.

Frank Lenk, director of research services at the Mid-America Regional Council, said the pay increase will be great for recipients, but there are some things to keep in mind.

"This is probably a temporary price increase," Lenk said. "I think it’s the results of demand snapping back a lot faster than supply."

Because of the pandemic, Lenk said we've seen the biggest price hikes in food and gas.

"There are supply shortages for all kinds of things, and it’s affecting food production. There’s also been an increase in the demand for food with more people staying home and cooking," Lenk said.

So when seniors get the extra cash in their Social Security checks, he wants them to remember something.

"It’s a big increase, but it’s big because you’ve already suffered a huge loss," Lenk said. "It’s compensation for the price increases you’ve already experienced, it’s not compensation for the price increases you might yet experience and so it brings you back up to where you were sort of at this time last year."

Sixty-six-year-old Independence resident Donna Kennedy said she appreciates the increase. However, it reminds her of getting a promotion at work while the company increases the cost of insurance.

"Sometimes it feels like you’re not really getting ahead, you’re just sort of staying even," Kennedy said.

Last year's cost of living adjustment was 1.3%. Lenk said a typical year is 2% or less.

"We’ve been fortunate to live in a low-inflation environment for a pretty long time, we haven’t really experienced this level of inflation since the 1980s, and that’s why the cost-of-living increase was so high," Lenk said.

He said he anticipates the adjustment leveling back out to somewhere between 2% and 3% within a year.