The Coronavirus and Social Security Benefits. Who’s affected?

The coronavirus has made its presence known through its growing impact on the global economy as well as its reoccurring mention on all major news sources. Though you’ve most likely heard all the basics on this spreading disease, have you considered how it may affect the next COLA update? Its possible effect has nothing to do with the disease itself, and everything to do with how it could affect the U.S. economy.

Each October, the Social Security Administration announces the coming year’s Cost of Living Adjustment (COLA). This measure adjusts the income Social Security beneficiaries receive to account for estimated inflation and changes in cost of living, based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The percentage increase is determined by taking the average CPI-W for the third calendar quarter of the most recent year a COLA was determined and comparing it to the average CPI-W for the third calendar quarter of the current year. If there is a positive increase of at least 0.05%, beneficiaries will receive said increase starting December of the current year. The CPI-W is determined by the following major spending categories: food & beverage, housing, apparel, transportation, medical care, recreation, education & communication, and other goods & services (i.e. tobacco products, haircuts and other personal needs). Though this method of calculation has been in place for decades, it isn’t perfect. According to the SSA, over 70% of beneficiaries are retired workers and their dependents. The spending habits of the Urban Wage Earners and Clerical Workers group do not directly match the spending habits of seniors. For example, the latter group is most likely allocating more of their spending to medical care. When estimating the future COLA, it is important to remember it is not a perfect calculation.

Coronavirus is the encompassing name of a family of viruses that can result in illnesses as minor as a common cold to more serious diseases such as Middle East Respiratory Syndrome or Severe Acute Respiratory Syndrome says the World Health Organization (WHO). The new novel strain of this virus, now officially named COVID-19 by the WHO, had not been identified in humans until the very end of 2019. As people prepare for how the 2019 Novel Coronavirus may spread in the U.S., demand for food and other household goods has risen. Conversely, as more severely affected countries have experienced changes in industry production, crude oil prices have deflated. You may have seen this firsthand if you pumped gas recently and noticed the lower than normal prices. The competing expected inflation of food & household goods and deflation of oil prices are two indicators of the upcoming COLA. In heavily affected China, their Consumer-Price-Index (CPI) jumped from a steady 1%-3% to a 5.4% in January of 2020. The increased demand for goods in the U.S. matched with the inflation in a country heavily involved in global supply chains is likely to affect our CPI as well. It is still unclear whether the inflation or deflation will outweigh the other.

Though the 2021 COLA announcement is still months away, looking at economic trends now can give insight into how beneficiaries will be affected in the coming year. Regardless of how coronavirus spreads, the adjustment in beneficiaries’ income will be made to ensure SSI and SSDI recipients are not barred from their needs by economy inflation.

Social Security and Supplemental Security Income (SSI) benefits for nearly 69 million Americans will increase 1.6 percent in 2020.

The 1.6 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 63 million Social Security beneficiaries in January 2020. Increased payments to more than 8 million SSI beneficiaries will begin on December 31, 2019. (Note: some people receive both Social Security and SSI benefits).

Source: https://www.ssa.gov/cola/

If you have any questions regarding the coronavirus and how it may affect your social security benefits, feel free to reach out to one of our social security disability attorneys at Hoglund Law.

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