Social Security recipients saw a 3.2% bump in their benefit payments in 2024 on account of inflation. But it has done little to help counteract the erosion of Social Security benefits’ purchasing power over time.
Benefits lost 20% of their buying power between 2010 and 2024, according to the Senior Citizens Leagues’ latest annual Loss of Buying Power report.
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 primarily because retirees’ expenses are increasing faster than Social Security COLAs, according to the Senior Citizens League.
“Between 2010 and 2024, Social Security COLAs increased benefits by 58 percent, averaging 3.9 percent per year. However, the cost of goods and services purchased by typical retirees rose by 73 percent, averaging about 4.9 percent annually over the same period. For every $100 a retired household spent on groceries in 2010, that household can only buy about $80 worth today.”
The study findings are based in part on an analysis of the cost of 36 goods and services that are typical purchases for people age 65 and older.
Those that have increased at the steepest rates are:
- Newest iPhone, basic model: 301.5% cost increase since 2010
- Average used car: 217%
- Bread: 146.7%
- Veterinarian services: 89.7%
- Average home: 88.6%
Yes, the league considers the newest basic-model iPhone “a necessity for today’s seniors” — noting that a basic iPhone 4 cost $199 in 2010, whereas a basic iPhone 15 now costs a few times as much.
What it means for you
Folks who have already begun claiming their Social Security retirement benefits have only two main options for coping with a cost of living that is outpacing COLAs: either find a way to reduce spending or to increase income.
Neither option is easy, especially for retirees, but both are possible to at least some extent, as we detail in stories like “15 Ways Retirees Can Stretch Their Savings for 30 Years” and “21 Ways Retirees Can Bring in Extra Money.”
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 at least taking the time to determine the best claiming strategy for your situation before applying.
If nothing else, consider consulting a vetted financial advisor who has a fiduciary duty to put your best interests first.
The people who staff Social Security offices have been known to give subpar advice and even flat-out incorrect information at times. So you don’t want to rely on their word alone when your retirement income is at stake.
It’s technically possible to undo a Social Security claim, but it’s a complicated and costly process with a narrow time window, and not everyone is eligible for it. So once you claim your benefits, you likely will be stuck with the same size monthly payment for the rest of your life. It would only increase to the extent that COLAs allow.
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