A new study from the Senior Citizens League says that seniors may be losing almost $400 a month on their Social Security checks. People who get Social Security have been complaining for a while that their monthly payments don’t keep up with inflation.
Many people who get Social Security say they have lost buying power because their benefits haven’t kept up with inflation, even though the government gives them an annual cost-of-living adjustment (COLA).
A new study by the Senior Citizens League shows that for almost eight of the last fifteen years, Social Security payments have not correctly reflected real inflation.
The League also says that the average Social Security payout is $370 less than it should be. This means that seniors’ ability to buy things has gone down by 20% since 2010, based on their monthly Social Security income.
Alex Beene, a teacher of financial literacy at the University of Tennessee at Martin, says that the different types of data and figures make it hard to tell if the COLA is keeping up with inflation.
Most seniors who are already having a hard time won’t be surprised if this report shows that they aren’t able to keep up with rising prices, even though higher payments were planned for in the budget.
The increasing cost of living has outpaced Social Security payments
People have long said that the Consumer Price Index for Urban Wage Earners, which is used to figure out the current COLA, doesn’t show how inflation affects housing and health care costs properly. This is because this kind of inflation tends to affect seniors’ Social Security payments more than younger people’s.
The current COLA is based on the CPI for urban wage earners, which has been criticized for a long time for not showing how inflation affects the prices of housing and health care. Kevin Thompson, a financial expert, told Newsweek not long ago that the cost of health care has gone up more than inflation, making it the most expensive thing for seniors. If this trend keeps up, seniors’ savings will run out, which will make prices go up.
Even though the average monthly salary is $1,778.00, a lot of seniors depend on Social Security payments as their only source of retirement income. Because Thompson is worried that the COLA won’t keep up with the effects of inflation on seniors, he stresses the need to spread out wealth. Investors have done well with stocks as a hedge against inflation, which has helped to make up for loses in the COLA.
As the number of seniors grows and baby boomers retire, more of America’s economic activity will rest on their ability to buy things. This will cause more problems in the future. The fact that the cost of living is rising faster than the COLA is worrisome for millions of recipients, especially the elderly. Seniors who are already having a hard time paying their bills will find this very expensive.
Also, Mary Johnson of the Senior Citizens League, who works as a policy analyst for Social Security and Medicare, says that the COLA is supposed to protect beneficiaries’ purchasing power from rising costs, but it is clear that it is not keeping up with the costs that seniors are actually facing.
The fact that healthcare costs have been rising faster than inflation and are a big problem for seniors lessens the effect of the COLA. This means that seniors might still have trouble paying for their medical bills even if the COLA goes up.
The growing difference between Social Security benefits and the real cost of living also needs to be thought about and dealt with. Jones says that Congress needs to “adopt a more accurate cost-of-living index and enact policies that will provide more adequate annual COLAs to Social Security retirees.” If these steps aren’t taken, the yearly changes that are supposed to help retirees keep up with inflation might not help them financially.