According to a report released by The Senior Citizens League, a non-profit organization, Social Security benefits have lost one third of their buying power since 2000. Retirees’ monthly benefit checks have not kept up with the rising costs of prescription drugs and other essential goods and services, resulting in a 33% drop in purchasing power.
Since 2000, typical expenses for seniors have risen twice as fast as the yearly cost-of-living adjustment (COLA) to Social Security. This annual raise is supposed to counteract the impact of inflation on Social Security, and while benefits rose 2.8% for 2019 (the highest increase since 2012), it is not enough to compensate for the mounting bills that seniors have to pay.
The cost-of-living adjustment is based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures inflation by the spending habits of younger workers, and they have different spending patterns than retirees.
A better way to offset inflation in Social Security benefits is by using the Consumer Price Index for the Elderly (CPI-E), which does track the spending of retired people age 62 and older; Congress would need to pass legislation to make any changes to the COLA calculation. Right now, estimates for the 2020 COLA is around 1.7%.
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