It is true that these retirees got a major win last fall when the Social Security Administration (SSA) announced that there would be a 5.9 percent cost of living adjustment (COLA) for this year. But if one really looks at the numbers, they are far from impressive.
The nearly 6 percent boost to the benefits will only raise monthly Social Security payments by roughly $90 to an average of $1,657, and a typical couple’s benefits will climb by approximately $150 to $2,754 per month. These are amounts that are tough to live on.
Preparing for Retirement
Making matters worse is the fact that many Americans enter their golden years with little or no savings. As a result, though not advised, many try to live on Social Security checks alone.
In fact, according to recent data released by the SSA, roughly 12 percent of men and 15 percent of women rely on the monthly benefit for 90 percent or more of their overall income. Moreover, 37 percent of men and 42 percent of women receive 50 percent or more of their income from Social Security.
“People are really starting to feel the impact of inflation, especially on everyday things,” Kristen Holt, president and chief executive of GreenPath Financial Wellness, a nonprofit debt counselor, told CNBC. “And that’s putting a big strain on people living on a fixed income,” she continued.
Also weighing heavily on Social Security checks is that Medicare Part B premiums are much higher than last year.
“The 2022 monthly premium was set at $170.10, up from $148.50 in 2021,” the AARP notes. “That $21.60 hike was the largest dollar Part B basic premium increase in the health insurance program’s history.”
Declining Buying Power
This all adds up to fast dwindling purchasing power for seniors on Social Security.
“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), claimed in a statement.
How to rectify this long-standing problem? One good way is to start approving even higher COLAs in the coming years.
“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,” TSCL concludes.
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.