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May 14, 2019 at 03:44 PM
No matter how high the government sets next year’s cost-of-living adjustment (COLA) for Social Security recipients, it will fail to offset the declining purchasing power of American seniors.
According to a new report from The Senior Citizens League, Social Security recipients have lost 33% of their buying power between 2000 and 2019.
“One would think that a higher cost-of-living adjustment in 2019 combined with relatively low inflation, would lead to an improvement of buying power in Social Security benefits,” said Mary Johnson, a Social Security policy analyst at the league and author of the report, in a statement. “But any improvement was offset by spiking costs of essentials, including out-of-pocket spending on prescription drugs.”
At best, the 2.8% Social Security COLA for 2019 delivered a one percentage point gain in the purchasing power of seniors, who had lost 34% of buying power between 2000 and 2018.
The 2019 COLA raised the average Social Security payment of $1,400 a month by roughly $39, but that’s not enough to keep up with rising costs of daily living for many seniors, according to The Senior Citizens League. Early findings from its annual survey of seniors found that close to 80% of survey participants said their household spending rose by more than $39 per month this year.
“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,” said Johnson.
The league found that a Social Security recipient collecting the average $816 monthly benefit in 2000 would collect $1,226.60 in 2019 as a result of annual COLAs but actually need another $408 to keep up with rising costs. A monthly benefit of $1,634.50 in 2019 is required “just to maintain his or her 2000 level of buying power.”