Social Security beneficiaries have lost nearly one-third of their buying power since 2000, according to the 2017 Social Security Loss of Buying Power Study released by The Senior Citizens League (TSCL). The findings represent a big 7% loss in buying power just over the past 12 months, from 23% in 2016 to 30% in 2017. This occurred as inflation has begun to climb, but people receiving Social Security received an annual cost-of-living adjustment (COLA) of just 0.3% for 2017. Housing and medical costs — particularly for prescription drug expenses — were among the most rapidly rising spending categories over the past year.
The study’s findings illustrate the impact on the buying power of Social Security benefits when the economy goes from a period of extremely low inflation to more typical rates of inflation. The last time there was a loss this big was in 2011, another year similar to 2017, when there was no COLA, but inflation spiked. The following year, in 2012, Social Security benefits increased by 3.6%. And like 2012, a higher COLA is likely in 2018.
Based on consumer price index (CPI) data through May of this year, TSCL’s Social Security policy analyst and study author, Mary Johnson, estimates that the COLA for 2018 may indeed be significantly higher than in recent years — around 1.9% - 2.1% — but that could change since there are still several months to go before the COLA is announced in October.
TSCL’s annual senior survey, conducted from January through March of this year, confirmed that monthly household expenses made steep increases over the past year. The majority, 67%, indicated their monthly expenses went up by more than $79. With today’s Social Security benefit averaging $1,320 per month, this is an unsustainable level of rising spending when there’s just a 0.3% benefit increase to match.
The survey found that a person having the national average Social Security benefit in 2000 — $816 per month — would have $1,169.80 per month by 2016 due to COLA increases. However, because retiree costs are rising at a substantially faster pace than the COLA, that individual would require a Social Security benefit of $1,517.80 per month in 2017 just to maintain his or her 2000 level of buying power.
Social Security beneficiaries receive a small automatic increase in their Social Security checks most years, intended to help their benefits keep up with rising costs. But since 2000, COLAs increased benefits a total of just 43 percent while typical senior expenses have jumped 86%. When costs climb more rapidly than benefits, retirees must spend down retirement savings more quickly than expected, and those without savings or other retirement income are either going into debt, or going without.
What are the 10 fastest growing costs for older Social Security recipients? See the list here