Inflation cooled last month to its lowest level in several years, data today from the Bureau of Labor Statistics show, reenforcing estimates that the Social Security COLA next year will be around a modest 2.6 percent.
But that will leave many retirees who live on a fixed income wanting more, as recent cost increases in critical categories are outpacing that.
Over the past 12 months through July, the rate of inflation was 2.9 percent, according to the figures from the Consumer Price Index for All Urban Consumers published Wednesday morning by the Bureau of Labor Statistics. While inflation is falling, the cost of living adjustments (COLAs) for Social Security benefits have not kept pace over 10 years, data from The Senior Citizens League show.
And further, the cost increases that retirees experience are often higher than those for workers, due in part to higher medical costs and long-term care.
“That is the key issue for all retirees,” said Mary Johnson, an independent Social Security and Medicare policy analyst. “Older consumers would consider this probably a COLA that, while they’re happy to have it … they are going to feel that it doesn’t very accurately affect their buying power.”
Social Security COLAs are based on price increases experienced by younger working adults, which is why the program’s benefits have lagged expenses for retirees, Johnson said.
Since 2010, the buying power of Social Security benefits has decreased on average by 20 percent, according to a report last month by The Senior Citizens League.
“The reality is that COLAs have become less and less likely to match inflation over time. In the 1990s and 2000s, 60 percent of COLAs beat inflation. In the 2010s, only 40 percent did. Through the 2020s so far, only one COLA out of five (2023; 8.7 percent) has done so,” that report read.
Spending on housing, medical expenses, and groceries can account for as much as 80 percent of retirees’ budgets, and if costs in those categories outpace the Social Security COLA, people living on fixed income and turn to credit cards, Johnson said.
“They may be putting more on their credit cards than they can pay off in 30 to 90 days,” she said.
Additionally, inflation isn’t consistent across geographies. For example, the wider New York City area saw inflation of 4.1 percent last month compared with a year ago, according to a report today by WalletHub. Meanwhile, the CPI increased by 3.5 percent in the Minneapolis-St. Paul area, by 3.4 percent around Detroit, and 3.7 percent in the Chicago area. But in the Denver area, the increase was comparably low, at 1.9 percent, and it was 2.1 percent around Houston, that report found.
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