Social Security recipients saw a 2.8% bump in their benefit payments this year on account of inflation. It’s the largest such increase in seven years, yet it’s not enough to counteract the erosion of Social Security benefits’ purchasing power, according data from the Senior Citizens League.
The organization’s 2019 “Social Security Loss of Buying Power Study” found that benefits have lost 33% of their buying power since 2000.
That’s an improvement of 1 percentage point from the prior annual study, which found that benefits had lost 34% of their buying power from 2000 to 2018.
COLAs versus costs
Social Security cost-of-living adjustments (COLAs) are small increases to benefits that are based on a federal measure of inflation known as the Consumer Price Index for Urban Wage Earners and Clerical Workers. COLAs occur almost every year.
Social Security benefits are losing buying power because retirees’ expenses are increasing faster than Social Security COLAs, according to the Senior Citizens League. The organization reports:
“This year’s study of retiree costs found that between January of 2000 and January of 2019, Social Security COLAs increased Social Security benefits by 50 percent, but the costs of goods and services purchased by typical retirees rose more than twice as fast — 100.3 percent.”
The study findings are based in part on an analysis of the cost of 39 goods and services that are typical purchases for people age 65 and older.
Of those 39 costs, 25 have increased at a greater rate than the COLA since 2000. Those that rose most sharply during that period are:
- Prescription drugs: The average annual out-of-pocket cost rose from $1,102 to $3,891.90 — an increase of 253%.
- Homeowners insurance: The average annual cost rose from $508 to $1,518.97 — a rise of 199%.
- Medicare Part B premiums: The average monthly premium rose from $45.50 to $135.50 — a rise of 198%.
What it means for you
Folks who have already claimed their Social Security retirement benefits have only two main options for coping with costs of living that are outpacing COLAs: Find a way to reduce your spending or to increase your income.
Neither option is easy, especially for retirees, but both are possible, as we detail in stories like “15 Overlooked Ways Retirees Can Stretch Their Savings” and “19 Ways to Make Extra Money in Retirement.”
For folks who have yet to claim Social Security benefits, the Senior Citizens League’s study underscores the importance of waiting as long as possible to apply for benefits, or otherwise maximizing your benefits by taking time to determine the best claiming strategy for your situation before applying for benefits.
As we explain in “7 Social Security Blunders That Can Ruin Your Retirement“:
“… once you claim benefits, you will be stuck with the same size payment for life. The amount of a person’s monthly benefit typically will never increase except for inflation adjustments.”
Earn more interest on your savings
Are you earning as much interest on your savings as you could be? Grow your savings faster with banks offering rates that are significantly higher than the national average. Find the best rates and start earning more interest on your savings by using the Money Talks News savings account and CD comparison tool.