Soaring inflation has deeply weakened the purchasing power of Social Security benefits in 2021, according to TSCL’s latest update on rising senior costs. The study, which compares the growth in the Social Security cost-of-living adjustments (COLAs) with increases in the costs of goods and services typically used by retirees, found that Social Security benefits have lost 32 percent (nearly one third of buying power) since 2000. During that period, data indicate that, while COLAs have increased Social Security benefits by 55%, typical senior expenses over the same period grew by 104.9%.
The Senior Citizens League has been conducting this study for 12 years. The study typically looks at data from the 12-month period of January of the previous year to January of the current year. But with record - setting inflation in 2021, COLA researcher Mary Johnson has updated the survey this year in order to help the public and Members of Congress understand the impact that high inflation could have on Social Security buying power.
Would a 5.9% COLA restore buying power of benefits in 2022? Not completely. This is especially the case for older retirees, anyone retired prior to 2000. The average Social Security benefit in 2000 was $816 per month. That benefit grew to $1,262.40 by 2021 due to COLA increases. However, because retiree costs are rising at a far more rapid pace than the COLA, this study found that a Social Security benefit of $1,671.70 per month — an extra $409.30 per month more — would be required, just to maintain the same level of buying power as in 2000. A 5.9% COLA would increase $1,262.40 by about $74.50 per month before deductions for Medicare premiums. That is substantially higher than any COLA in recent years, but still not enough (by a long shot) to completely restore buying power for people have been retired for the past 20 years.