Social Security benefits have lost 34 percent of buying power since 2000, according to the 2018 Social Security Loss of Buying Power Study recently released by The Senior Citizens League. This is the biggest loss of buying power recorded since 2012, and that was the biggest loss that The Senior Citizens League’s study has recorded to date.
The findings represent a significant one-year loss of 4 percentage points in buying power, with the loss increasing from 30% to 34% from January 2017 to January 2018. The loss occurred even though beneficiaries received a 2% annual cost-of-living adjustment (COLA) for 2018. Housing and medical costs — particularly for home heating expenses and Medigap premiums — 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 that to the growth in Social Security benefits due to annual COLAs.
The loss of buying power is an early indicator of whether the Social Security COLA will climb in the following year. Based on consumer price index (CPI) data through May of this year, we estimate that the COLA for 2019 will be about 3.3%, the highest since 2012. However, that number could change, since there are still several months of price data to be released before the Social Security Administration announces the COLA in October.
More than 1,057 respondents participated in The Senior Citizens League’s annual senior survey, which was conducted from January through March of this year. Participants confirmed that monthly household expenses made steep increases over the past year, far in excess of the dollar amount that their COLAs increased benefits. More than half, 56%, indicated their monthly expenses went up by more than $79. Yet 50% of survey respondents said that their COLA increased benefits less than $5 per month, after the increased Part B premium for 2018 was deducted from their Social Security benefits.
The study found that, since 2000, COLAs increased benefits a total of just 46%, while typical senior expenses have jumped 96.3%. Here’s a chart of the costs that are increasing the fastest.
|Item||Cost in 2000
Average cost $ or numeric data
|Cost in 2018
Average cost $ or numeric data*
|1. Medicare Part B monthly premium||$45.50||$134.00||195%|
|2. Prescription drugs Annual average out-of-pocket||$1,102.00||$3,172.72||188%|
|3. Home heating oil (gal.)||$1.15||$3.22||181%|
|4. Homeowner’s insurance (annual)||$508.00||$1,342.05||164%|
|6. Propane gas (gal.)||$1.01||$2.60||157%|
|7. Real estate taxes||$690.00||$1,579.06||129%|
|8. Total medical out-of-pocket expenses national average people age 65 and up||$6,140.00||$13,304||117%|
|9. Oranges (lb.)||$.61||$1.33||117%|
|10. Pet services and vets||$109.300*||$233.317*||114%|
* Where no average prices are available, U.S. Bureau of Labor Statistics CPI-U numeric data are used.
The survey found that a person receiving the national average Social Security benefit in 2000 — $816 per month — would have $1,193.10 per month by 2018. However, because retiree costs are rising at a substantially faster pace than the COLA, that individual would require Social $410.30 more per month, or $1,603.40 in 2018, just to maintain his or her 2000 level of buying power.
The study examined the increase in costs of 39 key items between 2000 and January 2018. The items were chosen because they are typical of the costs of most Social Security recipients, and include expenditures like Medicare Part B premium, that are not measured by the index currently used to calculate the COLA. Of the 39 items analyzed, 26 increased faster than the COLA over the same period. “This study illustrates why Congress should enact legislation to provide a more fair and adequate COLA,” says The Senior Citizens’ Executive Director, Shannon Benton. “To put it in perspective, for every $100 worth of groceries a retiree household could afford in 2000, they can only buy $66 worth today,” Benton adds.
To help protect the buying power of benefits, TSCL supports legislation that would base COLAs on the Consumer Price Index for the Elderly (CPI-E).
Want to read more about rising costs? See, The Costs That Are Rising the Fastest for Older Americans, By Doug Whiteman, MoneyWise.com.