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Higher prices have made it difficult for Social Security beneficiaries to keep up, even with a record boost to benefits for 2023.
An 8.7% cost-of-living adjustment, or COLA, put about $140 per month more in Social Security beneficiaries’ checks starting in January, according to estimates from the Social Security Administration.
Yet rising costs mean beneficiaries have lost 36% of their buying power since 2000, according new research from The Senior Citizens League, a nonpartisan senior group.
To be able to live as well on Social Security benefits as in the year 2000, today’s retirees would need an extra $516.70 per month, the nonpartisan senior group found.
High inflation ‘extremely difficult’ for retirees
Social Security COLAs have increased by 78% since 2000, according to The Senior Citizens League. At the same time, the cost of goods and services retirees typically buy has gone up by 141.4% over that time.
COLAs have averaged 3.4% annually since 2000, while goods and services have averaged about 6.2%.
This year’s loss in buying power — measured from January 2000 through February 2023 — improved from a 40% decline based on last year’s study. Yet the current 36% loss in buying power is still one of the deepest losses recorded, according to the group.
Eggs topped the list of fastest-growing costs for seniors since 2000. Other categories in the top five include prescription drugs, heating oil, dental services and Medicare Part B premiums.
Eggs were also the fastest-growing cost for seniors over the past year, based on data through February, the research found. Recently, wholesale egg prices have dropped from record highs over the winter.
Other categories in the top five for the year included apples, white bread, coffee and dental visits.
“The average retiree has found living with these high rates of inflation extremely difficult,” David Tinsley, senior economist at Bank of America Institute, recently told CNBC.com.
One caveat to a record high COLA this year is that the extra money could be prompting higher levels of spending among older Americans, according to research from Bank of America Institute.
While higher spending may complicate the fight against higher inflation, it is delayed relief for older Americans, whose COLA was lower than price growth in 2022.
The COLA for 2024 may be lower
The Social Security COLA may be around 3.1%, according to a new estimate from The Senior Citizens League, well below the 8.7% increase to benefits beneficiaries saw in 2023, the highest increase in four decades.
The 3.1% estimate for the COLA is preliminary and subject to change, said Mary Johnson, Social Security and Medicare policy analyst at The Senior Citizens League.
The latest consumer price index data shows inflation rose 4.9% over the past year as of April and 0.4% for the month — fueling hopes that inflation will continue to decline this year.
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The subset of the data used to calculate the annual Social Security COLA — called the Consumer Price Index for Urban Wage Earners and Clerical Workers, or CPI-W — rose 4.6% over the past 12 months and 0.6% for the month.
The Social Security Administration determines the annual COLA by comparing third quarter CPI-W data for the current year to the third quarter of the previous year. A cost-of-living adjustment is put in place if there has been an increase over the previous year. If there is no increase, the COLA may be zero.
