Inflation is rapidly eroding the buying power of Social Security benefits, according to new research published this week.
The Senior Citizens League, a nonpartisan group that focuses on issues relating to older Americans, estimated on Wednesday that Social Security recipients have lost 40% of their buying power since 2000.
"That’s the deepest loss in buying power since the beginning of this study in 2010," said Mary Johnson, a policy analyst at the Senior Citizens League who conducted the research.
Although Social Security benefits have climbed by 64% since 2000 thanks to cost-of-living adjustments, typical senior expenses through March 2022 have actually grown by more than double that rate – 130% – as consumer prices soar. The Labor Department reported that inflation surged by 8.5% in March, the fastest pace since December 1981, and continued to hover near that high in April, with prices rising by 8.3%.
In order to maintain the same purchasing power as there was 22 years ago, Social Security would have to increase by $539.80 per month.
"Retirees know all too well that Social Security benefits don’t buy as much today as when they first retired," Johnson said.
The Senior Citizens League has pushed Congress to adopt legislation that would index the adjustment to inflation specifically for seniors, such as the Consumer Price Index for the Elderly, or the CPI-E. That index specifically tracks the spending of households with people aged 62 and older.
The annual Social Security change is calculated based on the Consumer Price Index for Urban Wage Earners and Clerical Workers, or the CPI-W, which jumped 9.4% over the past year.
Based on current economic data, Johnson estimated the cost-of-living adjustment in 2023 could be as high as 8.6%, which would mark the steepest annual adjustment since 1981, when recipients saw an 11.2% bump.
The Senior Citizens League previously predicted the COLA for 2023 could be 8.9%, but the headline inflation figure has subsided slightly since then.
The Social Security Administration will release the final adjustment percentage in October.
The estimated figure could still be subject to change and ultimately hinges on whether inflation has actually peaked or will continue to rise. While economists pointed to Wednesday's figure as evidence that inflation may be subsiding, they noted that prices rose more than expected and are still near a record high – suggesting any decline could be painstakingly slow.