Seniors would need an extra $516 a month to recover the loss of buying power, a recent The Senior Citizens League study said. (iStock)
Inflation is moderating, but rising costs have eroded the buying power of Social Security earnings by 36%, according to a recent study by The Senior Citizens League (TSCL).
Older Americans that retired before 2000 would have to earn an extra $516.7 more per month or $6,200 more this year than what they are currently getting to maintain the same level of buying power as in 2000, according to the study.
The loss of buying power comes even as Social Security cost of living adjustments increased by 8.7%, which boosted the average monthly benefit by about $140.
While slowing from a 40-year high hit last June, inflation remains well above the Federal Reserve's 2% target rate. April's consumer price index (CPI), a measure of inflation, rose 4.9% year-over-year, a slowdown from the 5% increase in March, according to the Bureau of Labor Statistics (BLS).
"Without an accurate cost of living adjustment (COLA) that keeps pace with rising costs, beneficiaries lose purchasing power, especially throughout a retirement that could last 25 to 30 years," TSCL said. "This loss is cumulative and grows deeper as retirees age. It can cause significant hardships, including more rapid depletion of savings than expected, growing debt and worse health outcomes. In short, a significant deterioration in an older household's standard of living."
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The loss in buying power this year slightly improved from last year's 40% decline in purchasing power but is still one of the most profound losses recorded by the TSCL study.
"The cost of goods and services purchased by typical retirees rose by 141.4%, averaging about 6.2% annually over the same period," TSCL said. "For every $100 a retired household spent on goods and services in 2000, that household can only buy about $64 worth today."
Eggs topped the list of fastest-growing costs for seniors since 2000, according to recent data from TSCL, which compared price changes from March 2022 to February 2023. Also counted among the top five growing costs seniors are dealt with are prescription drugs, heating oil, dental services and Medicare Part B premiums.
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If Congress fails to raise or suspend the debt limit before June, the federal government will run out of money to pay all its obligations.
That includes the $90 billion monthly Social Security payments made to 65 million recipients, according to the National Committee to Preserve Social Security and Medicare. Medicare and Medicaid payments could also be delayed.
"Beneficiaries are legally entitled to full scheduled benefits under the Social Security Act," TSCL said. "But according to a recent issue brief from the Congressional Research Service, another law, the Antideficiency Act, prohibits government spending in excess of the available funds."
In other words, the Social Security Administration (SSA) would not have the legal authority to pay full Social Security benefits on time if the U.S. government ran out of money.
Moreover, the annual trustees' report recently released by the Treasury said that the Social Security trust funds will begin to run out of money by 2034, one year earlier than was projected.
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