Unsurprisingly, this news was met with plenty of enthusiasm. However, several months into 2022, it appears that this Social Security “raise” has done little to mollify the continual erosion of buying power among seniors.
“In January, the Consumer Price Index was up 7.5 percent on an annual basis. And while we don’t have February’s data yet, we can expect to see a comparable level of inflation once those numbers come in,” noted personal finance expert Maurie Backman at The Motley Fool.
“As such, the 5.9 percent raise seniors got to kick off the year just isn’t cutting it. And so many retirees are no doubt struggling financially these days in the face of rising living costs—particularly those who get most or, worse yet, all of their income from Social Security,” she continued.
Low Average Benefits
A quick glance at the numbers indicates why many retirees are still struggling in the current high-inflationary environment. That nearly 6 percent COLA boost only lifted the monthly Social Security payments by roughly $90 to an estimated average of $1,657, and a typical couple’s benefits climbed by approximately $150 to $2,754 per month.
Those are monetary figures that would be tough to live on in any environment, much less one where red-hot inflation is wreaking havoc on prices on everything from food and gas to rent and used cars.
“To put it in perspective, for every $100 worth of groceries a retiree could afford in 2000, they can only buy $68 worth today,” Mary Johnson, the Social Security policy analyst for The Senior Citizens League (TSCL), said in a statement.
One way to reverse this trend is for the SSA to be even more aggressive going forward in raising their COLAs.
“Social Security benefits are one of the few sources of retirement benefits to be adjusted for inflation,” TSCL wrote. “The intention is to protect the buying power of benefits when prices increase. But retirees frequently notice that over time their Social Security benefits don’t buy as much as they used to. This happens when the annual COLA doesn’t keep pace with the increases in costs typically experienced by older and disabled beneficiaries.”
Taking Personal Action
Backman added that the Social Security program can only do so much to provide a comfortable and long-lasting retirement. Therefore, it is important for people to start building up personal savings early on in their career.
“Social Security will only replace about 40 percent of your pre-retirement wages if you’re an average earner—and that assumes universal benefit cuts aren’t implemented. If that happens, those benefits will give you even less buying power,” she claimed.
“That’s why it’s crucial to work on building a nest egg. That’s something it’s too late for current retirees to do, but if you’re still working, you have a solid opportunity to amass a nice amount of retirement wealth,” she concluded.
Ethen Kim Lieser is a Washington state-based Science and Tech Editor who has held posts at Google, The Korea Herald, Lincoln Journal Star, AsianWeek, and Arirang TV. Follow or contact him on LinkedIn.