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Rising prices have made it difficult for Social Security recipients to keep up, even with a record increase in benefits for 2023.
A 8.7% cost of living adjustmentor COLA, are putting about $140 more per month on Social Security recipients’ checks starting in January, according to estimates of social security administration.
Yet rising costs mean that beneficiaries have have lost 36% of their purchasing power since 2000, according to new research from the Senior Citizens League, a nonpartisan group of seniors.
To be able to live on Social Security benefits as well as they did in 2000, today’s retirees would need an additional $516.70 a month, the nonpartisan seniors group found.
High inflation “extremely difficult” for pensioners
Social Security COLAs have risen 78% since 2000, according to the Senior Citizens League. At the same time, the cost of goods and services that retirees typically purchase increased by 141.4% during this period.
COLAs have averaged 3.4% per year since 2000, while goods and services have averaged around 6.2%.
This year’s loss in purchasing power – measured from January 2000 to February 2023 – has improved from a 40% decline based on last year’s study. Yet the current 36% loss in purchasing power remains one of the biggest losses on record, according to the group.
Eggs have topped the list of fastest growing costs for seniors since 2000. Other categories in the top five include prescription drugs, fuel oil, dental services and Medicare Part B premiums.
Eggs were also the fastest rising cost for seniors over the past year, based on data through February, the research found. Recently, wholesale egg prices have dropped from records over the winter.
Other categories in the top five for the year included apples, white bread, coffee and visits to the dentist.
“The average retiree has found it extremely difficult to live with these high inflation rates,” David Tinsley, senior economist at the Bank of America Institute, told CNBC.com recently.
One caveat to a record COLA this year is that the extra money could lead to higher spending levels among older Americans, according to Bank of America Institute Research.
While higher spending may complicate the fight against higher inflation, it is delayed relief for older Americans, whose COLA was below price growth in 2022.
COLA for 2024 could be lower
Social Security’s COLA could be around 3.1%, according to a new estimate from the Senior League, well below the 8.7% increase in benefit recipients seen in 2023, the largest increase in four decades.
The 3.1% estimate for COLA is preliminary and subject to change, said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League.
The latest consumer price index data shows Inflation rose 4.9% in the year to April and 0.4% for the month, fueling hopes that inflation will continue to decline this year.
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The subset of data used to calculate the annual Social Security COLA – called the Consumer Price Index for Urban Wage and Clerical Workers, or CPI-W – increased by 4.6% over the last 12 months and 0.6% for the month.
The Social Security Administration determines the annual COLA by comparing CPI-W data from the third quarter of the current year to the third quarter of the previous year. A cost of living adjustment is implemented if there has been an increase from the previous year. If there is no increase, the COLA may be zero.