An abrupt jump in inflation in February and March of this year wiped out a short-lived improvement in the buying power of Social Security benefits in 2020, according to TSCL’s latest study on rising senior costs. The study, which compares the growth in the Social Security cost of living adjustments (COLA)s with increases in the costs of goods and services typically used by retirees, found that, while consumer prices flatlined in 2020 through January 2021, costs are now sharply increasing.
The annual COLA increased Social Security benefits in January of 2021 by just 1.3 percent. While the lack of inflation in 2020 did somewhat improve the buying power of Social Security benefits by 2 percentage points by the month of January 2021 — from a loss in buying power of 30 percent to a loss of 28 percent — that improvement was completely wiped out by soaring inflation in February and March of this year.
The new study found that consumer price data through March 2021 indicate that Social Security benefits have (once again) lost 30 percent of their buying power since 2000, and the loss of buying power looks as though it might grow deeper in 2021, should the current inflationary trends continue. 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 recent aggressive inflation, TSCL felt it critical to include this data in our 2021 study findings. Doing so helps TSCL and the public to learn how this abrupt rise of inflation affects the buying power of Social Security benefits today.
This study looks at 39 expenditures that are typical for people age 65 and up, comparing the growth in the prices of these goods and services to the growth in the annual COLAs. Based on consumer price index data through April 2021, it appears that the next COLA will be considerably higher in 2022. The Senior Citizens League (TSCL) is forecasting that the 2022 COLA could be 4.7%, making it the highest since 2009. But with such a high level of inflation volatility, this estimate could change several times before the COLA is announced in October 2021.
Since 2000, COLAs have increased Social Security benefits by a total of 55%, yet typical senior expenses over the same period grew by 101.7%. 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 $1,645.60 per month in 2020 would be required just to maintain the same level of buying power as in 2000.
Top Ten Fastest Growing Costs of Older Americans Since 2000
|Item||Cost in 2000
Average cost $ or numeric CPI data*
|Cost in March 2021
|1.) Prescription drug out of pocket, generic, brand, specialty
(per yr. out of pocket)
|2.) Medicare Part B premiums (per mo.)||$45.50||$148.50||226%|
|3.) Homeowner’s insurance (per yr.)||$508.00||$1,414.00||178%|
|4.) Veterinarian services||109.300*||285.180*||161%|
|5.) Home heating oil (per gal.)||$1.15||$2.86||150%|
|6.) Total medical out of pocket costs (per yr.)||$6,140.00||$14,846.00||142%|
|7.) Potatoes (10 lbs.)||$2.98||$6.98||134%|
|8.) Propane gas (per gal.)
8.) Ground chuck (per lb.)
|9. Gasoline (per gal.)||$1.31||$2.86||118%|
|10. Real estate taxes (per yr.)||$690.00||$1,494.00||117%|
Source: The Senior Citizens League, May 2021.
The TSCL study looks at the costs of goods and services that are typically purchased by most Social Security recipients. This includes expenditures such as the Medicare Part B premium, which is not measured by the index currently used to calculate the COLA, yet is one of the fastest growing costs that retirees face. Of the 39 items analyzed, 27 exceeded the COLA while 14 were lower than the COLA.
This study illustrates why legislation is needed to provide a more fair and adequate COLA. To put it in perspective, for every $100 worth of groceries a retiree could afford in 2000, they can only buy $70 worth today. To help protect the buying power of benefits, TSCL supports legislation that would provide a modest boost in benefits and base COLAs on the Consumer Price Index for the Elderly (CPI-E) or guarantee that the COLA would be a minimum of 3 percent. To learn more, visit www.SeniorsLeague.org.