As the cost of living continues to rise, the current rate of increase in Social Security payments may not be sufficient to adequately support retirees. This results in a diminished standard of living for retired workers.
A proposed annual increase of $370 per month, bringing the total payment to $4,440 per year, could help retirees better meet their needs.
$4,440 increase in Social Security per year to compensate for inflation
A recent study from The Senior Citizens League indicates that Social Security benefits have declined in purchasing power by 20% since 2010. To offset this loss, retirees’ payments would require an additional $370 per month, making $4,440 per year.
From 2010 to 2024, the expenses associated with essential items such as housing, transportation, healthcare, and food have experienced significant increases up to 73%. These price hikes far exceed the cost-of-living adjustments (COLAs) which have increased by 54% during the same period.
Social Security benefits are adjusted each year for inflation using a cost of living adjustment based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). These adjustments have not kept up with inflation. Since 2010, the likelihood of COLAs matching inflation has declined over time. From 2020 till now, only one cost of living adjustment has surpassed inflation, the 8.7% increase in 2023.
The average Social Security benefit currently stands at around $1,781 per month, equivalent to approximately $21,372 per year. This amount, although seemingly substantial, is insufficient to cope with the inflation in the costs of necessities like housing, healthcare, and groceries, leading many senior citizens to struggle financially, unable to meet their needs.
For instance, retirees who could comfortably manage their monthly expenses may now face tough decisions between purchasing essential medications and buying nutritious food. Where an elderly person used to budget $800 for rent, they may now need to allocate $1,000 or more for the same living space. Similarly, a grocery trip that previously cost $100 might now amount to $119, placing additional strain on an already limited budget.
COLA expected lower than inflation for 2025
It is projected that recipients will receive a 2.63% COLA in 2025, which is lower than the current 3% inflation rate. If this prediction holds, it would be the smallest annual COLA since 2021. The final adjustment percentage will be released by the SSA in October.
Raising Social Security payments to compensate for the inflation rate annually would be a great course of action. This would mean an extra $370 monthly, making a total annual payment increase of $4,440. This would guarantee that retired citizens have a reliable and sufficient income to meet their essential expenses.
