Millions of retired Americans rely on Social Security retirement benefits as a primary source of income; but unfortunately, annual cost-of-living increases have not been enough to offset the higher costs eroding older consumers’ purchasing power. According to an annual study released by the Senior Citizen’s League in June, Social Security retirement benefits have lost 34% of their buying power over the past 18 years.
The study shows that typical retiree expenses have grown by 96.3% since 2000, while Social Security cost-of-living adjustments (COLAs) tied to the consumer price index have only increased benefits by 46% during the same time period. Of the 39 costs analyzed in the study, 26 grew faster than the percentage increase in COLAs from the year 2000 to 2018. Housing and medical outlays top the fastest growing expenses that retirees face. Critics have often stated that the COLA formula fails to capture the different spending patterns for retirees compared with the US population at large.
You can read the full article, including a table of the fastest growing retiree costs: here.
Additionally, you can review the full report: here.
Today our social security system provides 40% of an average retiree’s income need. However, trends indicate that it will provide less of the overall retiree’s income in the future. (The study also found a 4% loss in buying power from January 2017 through December 2017.) Because of this change, individuals should continue to be diligent with their savings and long-term retirement planning.
Bob Lagonegro, CFP®