Over the past few years, inflation has been eating into retirees’ incomes and budgets, and a new study claims that the cost of living adjustments (COLA) have not been enough to alleviate that impact on them.
In short, recipients of Social Security benefits, such as retirements, Social Security Disability Insurance (SSDI), and Supplemental Security Income (SSI) have lost money every time inflation has hit the United States and its inhabitants: according to the study conducted by The Senior Citizens League (TSCL), a non-partisan organization for the defense of retirees, these people have lost 20% of purchasing power from 2010 to the present day.
This means that for every $100 that a retired family spent on food in 2010, today they can only buy about $80. Housing and medical expenses are two of the items that have put the most pressure on retirees.
Social Security Recipients Should Receive $4,440 More, Study Suggests
According to TSCL’s analysis, retired workers should be receiving, as of today, about an additional $370 per month, which adds up to $4,440 more per year. As of May 2024, the average benefit a Social Security retiree was receiving is $1,778.24, down significantly from the January average of $1,907.
“Without a precise and adequate adjustment that keeps pace with the rising costs of seniors, Social Security recipients have cumulatively lost purchasing power,” said Shannon Benton, executive director of The Senior Citizens League.
The Social Security COLA Increase Is Insufficient, Experts Warn
The COLA increase in Social Security is an annual adjustment in the benefits that beneficiaries receive to offset the effects of inflation. This increase is designed to ensure that the purchasing power of benefits does not decrease over time due to the increase in the cost of living.
Such adjustment is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). This index measures changes in the prices of a basket of goods and services representative of what urban workers consume. If the prices of this basket increase, the Social Security benefits also increase to maintain the purchasing power of the beneficiaries.
The COLA increase is made by comparing the average CPI-W for the third quarter of the previous year with the same period of the current year. If the comparison indicates that there is an increase, Social Security benefits (retirements, SSI, and SSDI) will increase, and if not, then they remain the same for another year.
Shannon Benton believes that the COLA should be calculated based on the CPI-E, which is the Consumer Price Index for the Elderly, designed especially for older adults. This index measures the changes in the prices of a basket of goods and services consumed by people over the age of 62.
Unlike the CPI-W, which is designed based on salaried workers and urban clerical workers, the CPI-W is better suited to more realistic consumption for retired people, such as medical expenses, essential aid personnel and others.
According to the report mentioned above, Social Security benefits increased by 58% between 2010 and 2024, while the cost of goods and services purchased by the typical retiree increased much faster – by 73% – during the same period.