A report from the Senior Citizens League highlights the loss of buying power in Social Security payments, tracking their erosion over time vs. inflation—and an especially harsh loss of 10% over the past year.
Keeping up with rising expenses has always been a problem for those living on retirement income. Cost-of-living increases have long been the fix—though on whatever form of savings plan or other payments a person is on, COLAs rarely have kept pace.
So, buying power erosion has often been the result. Over the past year, as documented in a recent report from the nonprofit Senior Citizens League, the problem has been—as everyone would at this point expect—especially bad.
But THIS Bad?:
“Rapidly rising prices since March 2021 led to an erosion of 10 percentage points in buying power when compared with March data in 2022,” the group’s full report states. “While almost every expenditure category increased, this year’s erosion in buying power was most felt in energy costs for heating and gasoline, higher prices for many food items, and the steep jump in Medicare Part B premiums in 2022.”
There you have it. Fully 10% loss in buying power, so far, over this past year of what for most Americans is regarded as severe inflation—which it’s been, compared with previous decades.
The Biden administration and many economists, including observers in the administration’s camp, cite market, demand and supply chain swings caused by the COVID pandemic as the largest contributors to the problem. Others, particularly political opponents, say, not so fast, inflation was kicking off well before the pandemic’s grip. (Though the latter need to use care with this argument, considering which party held the White House during the first year of COVID, and twice approved massive relief money infusion bills that, in hindsight, likely also fed inflation.)
In any case, an equally damning claim—now often accepted regardless of party—is that both the administration and the Federal Reserve were too slow in taking strong actions normally effected to slow surges in prices (most importantly, raising the cost of borrowing—which the Fed is now doing at an accelerated pace.)
In the end, whatever the inevitabilities or missteps for now we have high inflation.
The Senior Citizens League report notes that the 2023 COLA for Social Security recipients is likely to come in at about 8.6%, the sharpest rise in four decades. For the benefit of Social Security recipients, the group supports a hefty hike while telegraphing deep concerns about such ongoing inflation.
Moreover, SCL also notes that even with the more than 8% leap, payments will remain well behind household costs to retirees. And, perhaps most stunningly, the group puts the recent figures in a harrowing context of a far worse—and well-documented—long, slow grind of lost purchasing power over many decades.
That longer-term loss of buying power is due to a steady line of Congresses and White Houses, led by both major parties, never getting serious—to date—about ensuring that ordinary retirees can maintain a floor on needed spending power, commensurate with even the low inflation this country enjoyed over the long haul. Government after government has stuck with deeply flawed COLA formulas, something the group has been advocating for years must change.
“Social Security benefits are adjusted annually for inflation to protect the buying power of beneficiaries when prices rise,” the report summarizes, while saying so far the calculation is terribly flawed. “Without an accurate and adequate adjustment that keeps pace with rising costs, beneficiaries lose purchasing power, especially over the course of a retirement that could last 25 to 30 years.”
And the net cost of that failure, in recent times, on the average Social Security-dependent retiree?
“The buying power of benefits of those who retired before the year 2000 has eroded by 40%— the deepest loss in buying power since the beginning of this study by The Senior Citizens League in 2010,” SCL says in an alarming release accompanying the report.
The upshot, in hard numbers: “COLAs have increased Social Security benefits by a total of 64 percent, yet typical senior expenses through March 2022 grew by more than double that rate — 130 percent.”
This story has been updated.
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