Homestimulus checkThis year's increase in Social Security has not kept pace with inflation....

This year’s increase in Social Security has not kept pace with inflation. This is how much money seniors have lost

When the Social Security Administration announced that benefits would increase by 5.9% in 2022, many seniors jumped for joy (or got as close to it as their bodies allowed). After years of stingy adjustments to the cost of living, or COLAs, the 2022 increase finally represented a significant amount.

But it didn’t take long for that 5.9% COLA to become somewhat useless. Since the beginning of the year, inflation has risen extremely. And while the most recent reading of the consumer price index in July showed a modest decline in inflation from June at 8.5%, it was still sky-high.

With inflation soaring, seniors on Social Security have lost purchasing power this year, despite a generous hike. And while experts are calling for an even more substantial COLA by 2023, the fear is that seniors will fall behind financially anyway.

Two people on a couch looking at documents.

Image source: Getty Images.

This year’s COLA just didn’t make it

While Social Security benefits received a nice boost in early 2022, the impartial Senior League maintains that seniors have by no means been ahead of the curve. Quite the contrary — the group estimates that based on the average monthly benefit, seniors on Social Security fell $58 a month short due to inflation, and have lost $373.80 so far.

Of course, it’s not just seniors who are losing buyer power. While wage growth has been robust this year for members of the workforce, wage increases are simply not keeping pace with the rising cost of living. So all in all, everyone is dealing with extreme inflation.

That said, working people have more options for raising extra cash, such as boosting job skills to land pay raises or taking on a second job. Seniors on Social Security who haven’t worked for years may become more stuck.

Will the COLA of 2023 break the cycle?

The Senior Citizens League at one point predicted Social Security benefits would increase by 10.5% by 2023. That estimate has now been reduced to 9.6% — an increase that would net the average beneficiary an additional $159 per month.

Of course, we won’t really get the hang of next year’s Social Security COLA until the third quarter inflation data is fully available. And that will only happen in a few weeks. But either way, while seniors can hope for a generous raise in 2023, they should also prepare for the fact that it may not help them get ahead in the face of inflation. A best-case scenario would really be an increase that helps seniors keep up with rising costs.

All this underlines the importance of not retiring solely on social security. Employees are often advised to build up savings so that they have an income to supplement their benefits. But many seniors today don’t have nest eggs to fall back on. Rather, they are largely limited to the income that Social Security provides them. And it’s those seniors who will be hurt the most when the 2023 COLA ultimately falls short as the 2022 COLA clearly did.


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