With a few of our industry rags shouting look out above for the Social Security COLA (Cost of Living Adjustment) we took a deep dive into the SSA (Social Security Administration) methodology for the adjustment.
Pension Recipients with COLA adjustments you likely will be in the same boat of increases, depending on the index the COLA adjustment is marked against….ok digressing a bit, but wanted to get that thought out !
Social Security COLA Methodology
Basically the SSSA looks at the CPI – W in the third quarter of the year and compares it to the prior year and marks the new COLA Accordingly….
The fuss or cheer, is due to the dramatic increase in the CPI – W …that most recent print is 6.1% WOW!
The CPI – W
“The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) is based on the expenditures of households included in the CPI-U definition that meet two requirements: more than one-half of the household’s income must come from clerical or wage occupations, and at least one of the household’s earners must have been employed for at least 37 weeks during the previous 12 months. The CPI-W population represents about 29 percent of the total U.S. population and is a subset of the CPI-U population!”
From the latest BLS (Bureau of Labor Statistics) Here
SSA Methodology
Here is the SSA Methodology from their calculation pamphlet last year here https://www.ssa.gov/pubs/EN-05-10526.pdf
To determine the COLA, the average CPI-W for the third calendar quarter of the most recent year a COLA was determined is compared to the average CPI-W for the third calendar quarter of the current year. The resulting percentage increase, if any, represents the percentage that will be used to increase Social Security benefits beginning for December of the current year. SSI benefits increase by the same percentage the following month (January). If the increase in the CPI-W is at least one-tenth of one percent (0.1 percent), there will be a COLA. However, if the CPI-W increases by less than 0.05 percent, or if the CPI-W decreases, there won’t be a COLA.
Have a Great “COLA Adjustment Heads Up” Day!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
$treet-¢ents 
July (YIKES GOING FAST) 2021 Financial Planning and Capital Market Review – By John Kvale
Hello and Welcome to our July 2021 Financial Planning and Capital Market Update!
If you are too busy to read, feel free to listen as we describe our post and thoughts in friendly podcast audio format as well as Video!
Newbies –
We like to articulate our thoughts and review on a Monthly basis our Financial Planning Tips, Capital Markets and current events!
Hope you enjoy!
July 2021 Video
YouTube
Financial Planning Tip(s)
IRS Refunds and Tax Return Processing Very Delayed
In this Break In Post, after having discussions with several of you, and then touching our CPA contacts we came to the conclusion that the IRS is delayed in processing returns and more importantly REFUNDS!!!
Before we could get the news to you, this Yahoo Finance Article nicely summarizes that the IRS is behind on a whopping 20% of returns or over 30 million !
With a September 1, 2021 IRS stimulus check lookback (those who did not get the last round of stimulus will be reviewed by the IRS to see if they qualify) the IRS has their hands very full….
All together…. PATIENCE! They will eventually get to us!
Fingers Crossed For a Hot (Large) COLA Increase
Catching wind through our contacts of a possible HOT (read Large!) COLA adjustment this year for Social Security and possibly those lucky ones that have a COLA adjuster on their Pension or other retirement plan we dug in here in this post and outlined the methodology used by the SSA. The line in the sand for adjustment is later in the year but as can be seen by the latest CPI-W running at 6.1%, with a little luck, we may have a very nice adjustment on our hands!
Capital Market Comments
Valuations are Getting Better but Expectations are WAY out of Line!
In this post and with the help of our Friends at JPMorgan we happily reviewed the far right hand smartly turning graph, that is headed in the correct direction for better valuations… YAY
A bit later in the month we ran across a wonderful but somewhat worrisome poll done by Natixis of over 8000 investors and their expected return over the next 10 years…. Way off base in our minds….
Likely to see this last poll make its way into the Newsletter as these numbers are likely so exaggerated, we want more air time!
Ok…that’s a wrap for the July review….
Have a Great Day, Talk to You at the End of August!
John A. Kvale CFA, CFP
Founder of J.K. Financial, Inc.
A Dallas Texas based fee only
Financial Planning Total Wealth
Management firm.
jkfinancialinc
street-cents
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Posted in Audio, Clients/Clients Only, General Financial Planning, Investing/Financial Planning, Market Comments, Monthly Review, Retirement Planning, Social Security, Tax Related, Video
Tagged Cola, Forward PE, Inflation, IRS, IRS Delays, IRS Refunds, JPMorgan, Natixis, Natixis Investor Survey, Pension COLA, Social Security COLA