Social Security benefits have lost 34 percent of their buying power since 2000 according to the latest data in an annual study by The Senior Citizens League (TSCL). During that period annual Cost of Living Adjustments (COLAs) increased benefits 36 percent, but expenses typical of seniors climbed 82 percent, more than twice as fast. Average Social Security benefits in 2000 were $816 per month, rising to $1,110 today, with no COLA increase at all in 2010 or 2011. The study found that a senior receiving average benefits in 2000 would actually need about $1,485 per month today just to maintain his or her 2000 level of buying power.
The study highlights that retirees and the disabled are at risk of not having sufficient income in their later years, especially as people live longer. Having an adequate Social Security COLA that keeps up with their costs is absolutely critical, as savings and other sources of income decline and health expenses increase with age. A majority of the 53 million senior and disabled Social Security recipients depend on it for at least half of their total income. About one-third of all beneficiaries rely on it for 90 percent or more of their total income.
The study examined the price change of 32 key items between January 2000 and January 2012. The items were chosen based on the goods and services frequently mentioned in seniors’ letters,, emails, and surveys conducted by TSCL. While the biggest price increases were in heating oil (236%) and natural gas (184%), Medicare Part B premiums increased as rapidly as gasoline over the survey period, (120%). Medicare premium costs aren’t reflected at all in the growth of COLAs. Currently the government uses the Consumer Price Index for Workers (CPI-W) which doesn’t include the market basket of typical expenses of people 65 years and older, to calculate the COLA.
How Seniors Costs Have Grown Since 2000
|Category||Expense||Cost in 2000||Cost in 2012||Percent Increase,
|Homeowner’s insurance (annual)||$508.00
|Real estate tax (annual)||$690.00||$1,275.96||85%|
|Heating oil (gallon)||$1.15||$3.84||236%|
|Natural gas (gallon)||$1.01||$2.87||184%|
|Electricity (per kw hr)||$.08||$.11||38%|
|Transportation||Gas, all grades (gallon)||$1.53||$3.36||120%|
|New & used vehicles||N/A||N/A||(-1%)|
|Medical||Total out-of-pocket medical expenses||$1,074.50||$1,390.60||29%|
|Prescription drugs, generic, brand, special||$623.70||$610.35||-2%|
|Dental, general visits||$377.40||$581.60||54%|
|Medicare Part B premiums (monthly)||$45.50||$99.90||120%|
|Medicare Part D premiums||$25.93||$39.40||52% (since 2006)|
|Food||10 lbs. potatoes||$2.98||$5.98||101%|
|1 lb. butter||$2.52||$3.50||39%|
|Ground chuck (lb.)||$1.90||$3.29||73%|
|Bread, white loaf||$.91||$1.42||56%|
|1 lb. coffee||$3.54||$5.50||55%|
|Communication||First class postage||$.33||$.45||36%|
|Basic phone service, local||$55.37||$71.05||28%|
|Other||Personal care products||N/A||N/A||6%|
|Personal care services||N/A||N/A||33%|
The erosion in the purchasing power of Social Security benefits may be higher than average over the next year. The Trustees recently forecast that the COLA payable in 2013 would be 1.8%. But Medicare Part B premiums alone are expected to increase five times faster from $99.90 to $109.10 — more than 9 percent. In addition, TSCL’s early surveys in 2012 indicate that at least half of all seniors responding are reporting higher Medicare supplement and drug plan premiums and cost sharing.
Social Security recipients need a COLA that more adequately protects the buying power of their Social Security benefits. TSCL is lobbying for legislation that would use a “seniors” consumer price index to calculate the annual COLA. To learn more and to participate in TSCL’s surveys and polls visit www.SeniorsLeague.org.
Sources: 2012 Social Security Trustees Report, April 23, 2012. 2012 Medicare Trustees Report, April 23, 2012.