What History’s Highest Social Security COLAs Can Tell You Today

Current predictions indicate that Social Security recipients are likely to receive a cost-of-living adjustment (COLA) of about 3.9% in 2027, thanks primarily to the high cost of living and inflation that doesn’t seem to want to budge. And while 3.9% seems relatively high, it’s nothing compared to some COLAs of the past. Here, I’m taking a look at the history of COLAs, specifically at years when the benefit bump was truly high. Missed Nvidia in 2009? This Rare Signal Is Flashing Again. In 2009, a “Double Down” signal flashed for a little-known chipmaker called Nvidia. For the first time in years, that same “Total Conviction” signal is flashing for a company 1/100th the size of Nvidia. Continue » Image source: Getty Images. 1975: 8% COLA Before 1975, Social Security benefit increases were not automatic. Instead, Congress had to pass specific legislation to raise benefits, and these raises were irregular. In addition, they typically lagged behind inflation. Because of this, Social Security recipients could go years without an increase and then receive a large, politically timed Social Security COLA boost. In 1975, a new law required benefits to rise with a measured increase in consumer prices, and because the CPI-W index indicated inflation of roughly 8%, benefit recipients received an 8% increase. 1980: 14.3% COLA In the late 1970s, the U.S. experienced stagflation, with high inflation, stagnant or weak economic growth, and high unemployment occurring simultaneously. There was also a major energy crisis during the 1979 Iranian Revolution, with consumer prices rising at double-digit rates. This “perfect storm” of conditions led to the largest COLA increase on record, at 14.3%. This raise helped push Social Security to the brink of the funding cliff, forcing Congress to step in with solutions to keep the program solvent. 2022: 8.7% COLA Between 2020 and 2022, the COVID-19 pandemic led to supply chain disruptions, increased consumer demand, and higher energy prices. By the time the 2022 COLA arrived, the CPI-W showed a substantial increase in inflation, which resulted in an 8.7% increase in Social Security benefits. While there have been years when COLAs have been higher than they’re expected to be in 2027, the reason why has always been the same. COLAs are intended to help recipients keep pace with inflation. Since 1975, it hasn’t been about whether politicians are trying to garner favor with Americans or if Congress is in the mood to vote on a raise. It’s strictly about what’s going on with the economy. While an 8% or 10% raise in benefits may sound wonderful, any large COLA increase is a clear indication of the financial struggles Social Security recipients are experiencing. The $23,760 Social Security bonus most retirees completely overlook If you’re like most Americans, you’re a few years (or more) behind on your retirement savings. But a handful of little-known “Social Security secrets” could help ensure a boost in your retirement income. For example: one easy trick could pay you as much as $23,760 more… each year! Once you learn how to maximize your Social Security benefits, we think you could retire confidently with the peace of mind we’re all after. Many Americans leave money on the table in retirement. Learn more about these retirement strategies and more, available when you join Stock Advisor. View the “Social Security secrets” » The Motley Fool has a disclosure policy. What History’s Highest Social Security COLAs Can Tell You Today was originally published by The Motley Fool