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Retired workers would need a $370 monthly bump in their Social Security payments to make up for a 20% loss of buying power since 2010, a new report says.
The average monthly Social Security benefit for retired workers, which was $1,860 as of January, would need to rise to $2,230 to make up for the loss in buying power, according to a new report by the Senior Citizens League, a nonprofit advocacy group.
Social Security benefits get annual cost-of-living adjustments based on the consumer price index for all urban wage earners and clerical workers (CPI-W), a government inflation measure.
The 2024 Social Security cost-of-living-adjustment, abbreviated COLA, was 3.2% and followed large increases of 8.7% and 5.9% COLAs in 2023 and 2022, respectively.
However, according to the Senior Citizens League, COLA adjustments over the years haven’t matched the inflation that beneficiaries face, which hurts the living standards of many of the roughly 70 million Americans who receive Social Security.
Benefits for retired workers have increased 58% since 2010, when the average monthly amount was $1,176. But that hasn't been enough to offset recent inflation, especially in housing and transportation costs, which weigh heavily on older Americans' budgets, according to the report. In that timeframe, retired beneficiaries have reportedly faced 73% inflation.
Social Security benefits lose buying power
The Senior Citizens League's analysis of buying power is based on “a mixture of index data, including from the CPI, and publicly available price data, such as the cost of a new car.” Also, the analysis uses an experimental inflation index for the elderly, the CPI-E, for weighting.
With this methodology, which emphasizes things like medical costs, the organization argues that only one out of the last five COLAs actually matched the inflation affecting older Americans. (The exception was 2023 when the 8.7% COLA exceeded the calculated inflation rate of 6.5%.)
“As the recent string of COLAs outmatched by inflation suggests, COLAs have gradually become less likely to beat inflation over time," the Senior Citizens League said in a report, noting that 60% of the adjustments in the 1990s and 2000s exceeded inflation.
Their math shows that the 3.2% COLA for 2024 should have been 3.4% to match inflation, and the 5.9% COLA for 2022 should have been 7.0%.
The report argues that 2010 and 2011 were particularly “bad misses” that contributed significantly to the loss of buying power. No COLA adjustments were made those years because the CPI-W didn’t show an increase, but the Senior Citizens League reports the inflation rate for retired workers was 2.7% for the 2010 COLA period and 1.5% the following year.
Social Security continues to be one of the most popular government programs. A separate report this week from the National Institute on Retirement Security found that 87% of Americans say the program "should remain a priority for the nation no matter the state of budget deficits." Also, a large majority of respondents said they want Congress to act now on a long-term funding solution for Social Security.
Without a legislative solution, Social Security trust fund reserves are on track to be depleted just over a decade from now. At that point, only 83% of benefits would be paid to recipients.
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