Between October of 2018, and January 2019, consumer prices fell according to data from the Bureau of Labor Statistics.  On January 1, 2019, Social Security beneficiaries received a cost-of-living adjustment (COLA) of 2.8%.  Theoretically, the combination of higher benefits, and lower prices, should translate into more money for retirees in the short term.  But according to TSCL’s study of the rising costs of older Americans, this is not necessarily the case.  Any improvement in Social Security buying power in 2019 has been offset by stiff increases in costs of other essentials, particularly out-of-pocket spending on prescription drugs that aren’t adequately reflected in the inflation measure used to index Social Security benefits for the COLA.

In fact, Social Security benefits have lost one-third (33 percent) of their buying power since the year 2000.  That represents a very small 1 percent improvement in Social Security buying power, compared to a loss of 34 percent in from 2000 to 2018.  On the other hand, the tepid growth in price inflation suggests that the COLA may be low in 2020, about 1.7%.

This year’s study of retiree costs found that, between January of 2000 and January of 2019, Social Security COLAs increased Social Security benefits by 50 percent, but the costs of goods and services purchased by typical retirees rose more than twice as fast — 100.3 percent.  Food and medical costs — particularly for fresh fruits and vegetables, and prescription drugs — were among the most rapidly-rising costs over the past year.  The study examines the growth since 2000 in the price of goods and services that are typical for retired and disabled households, and compares them to the growth in Social Security benefits due to annual COLAs.

The same $100 a retired household spent in 2000 can only buy about $67 worth of goods and services today.  For example, older homeowners with an oil tank that holds 500 gallons paid $575 to fill up in January of 2000.  In 2019 however, the same households had to come up with $1,545 for that amount of heating oil.  In 2000, the average Social Security benefit was $816 per month.  Retired householders with average benefits could fill the tank and still have money left over.  By 2019, however, COLAs increased the monthly benefit to only $1,226.60.  Average benefit households had to borrow to cover the full cost of a fill-up, dip into savings, or go without adequate heat.

Because retiree costs are rising at a substantially faster pace than the COLA, people with an average Social Security benefit of $1,226.60 today would require a Social Security benefit of $407.90 more per month, or $1,634.50 in 2019, just to maintain his or her 2000 level of buying power.

A majority of the 60 million senior and disabled Americans who receive Social Security depend on it for at least 50 percent of their total income, and one - third of all beneficiaries rely on it for 90 percent or more of their income.  To help protect the buying power of benefits, TSCL is working to build support for bipartisan legislation called the Fair COLA for Seniors Act (H.R. 1553) that would base COLAs on the Consumer Price Index for the Elderly (CPI-E).  To learn more, visit www.SeniorsLeague.org.

Top Ten Fastest Growing Costs of Older Americans Since 2000

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