2.8% Social Security Increase Won’t Offset Rising Senior Cost of Living

Cynthia Measom
Updated

The majority of senior citizens — 48 percent of married couples and 69 percent of unmarried individuals — depend on Social Security benefits for more than half of their income in retirement, according to 2018 data from the Social Security Administration. But retired seniors don’t always see an annual cost-of-living adjustment — aka COLA — reflected in their Social Security benefit checks each year.

From 2000 to 2018, COLAs didn’t occur in 2010, 2011 or 2016. But the SSA announced Oct. 11, 2018, that seniors would see a 2.8 percent increase in their benefits for 2019.

Click to find out how this meager increase will affect the buying power of retirees who depend on Social Security benefits.

Senior Expenses Are Growing Twice as Fast as SSA Benefits

COLAs are implemented by the SSA when the Department of Labor’s Consumer Price Index for Urban Wage Earners and Clerical Workers shows a rise in the cost of living, according to Jim Borland, the SSA’s Acting Deputy Commissioner for Communications.

“The CPI-W rises when prices increase for the things the average consumer buys,” he said in an SSA blog post. “This means that when prices for goods and services we purchase become more expensive, on average, the COLA increases monthly benefit levels and helps you keep up with the changing cost of living.”

But the reactionary adjustments appear to be too little, too late, in comparison with senior expenses and findings from The Senior Citizens League 2018 Loss of Buying Power study.

Retirees Have Lost 34% Buying Power

Keeping up with the changing cost of living isn’t easy for retirees, especially with the limited increases from the SSA. Since 2000, seniors have lost 34 percent of their buying power overall, according to The Senior Citizens League 2018 Loss of Buying Power study.

Understand: How Your Retirement Age Impacts Your Social Security Benefits

Additional findings of the study included:

  • Since 2000, typical senior expenses grew more than twice as fast — 96.3 percent — than Social Security benefits — just 46 percent.

  • Seniors who spent $100 in 2000 for goods and services would only have the buying power of $66 for those same goods and services today.

  • Between January 2017 and January 2018, the loss in Social Security benefits buying power deepened by 4 percent, the most significant loss experienced since 2012.

These Are the Costliest Budget Items for Retirees

The top three fastest-growing expenses for seniors since 2000 are based on medical and home energy costs, according to the study:

Fastest-Growing Expenses for Seniors

Good or Service

Average Cost in 2000

Average Cost in 2018

Percentage Increase

Medicare Part B Premium

$45.50

$134.00

195 percent

Prescription Drugs

$1,102.00

$3,172.72

188 percent

Heating Oil

$1.15

$3.22

181 percent

Source: The Senior Citizens League 2018 Loss of Buying Power Study

Find Out: Why Everything You Buy at Walmart and Amazon Is About to Cost More

The low COLAs by the SSA can’t keep up with rising expenses and have a devastating effect on seniors’ buying power. In 2018, 50 percent of study respondents said that they saw a less than $5 per month increase in COLA benefits after their increased Medicare Part B Premium was deducted.

The study concluded that the progressive erosion in buying power suggests that millions of retirees — especially those age 80 and over who have been retired since 2000 — are faced with the distinct possibility of a decline in their standard of living in the future.

Click through to find out how to maximize your Social Security benefits.

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This article originally appeared on GOBankingRates.com: 2.8% Social Security Increase Won’t Offset Rising Senior Cost of Living