Home Personal Finance Social Security COLA could be 3.1% in 2024; buying power drops 36% since 2000

Social Security COLA could be 3.1% in 2024; buying power drops 36% since 2000

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Social Security spending power has declined 36% since 2000, according to a new study by the Senior Citizens League. This means that a senior who retired before 2000 would need to spend an additional $500 or more a month to maintain the same level of purchasing power. Professional senior think tank.

The Alliance for Senior Citizens also said it expects Social Security’s cost of living adjustment to be 3.1% in 2024, compared to an 8.7% increase in COLA in 2023. The organization said last month that he expects her COLA in 2024 to be below 3%.

read: Social Security’s next COLA could be ‘below 3%’

If the annual COLA can’t keep up with rising costs, it could reduce the purchasing power of Social Security benefits. Inflation is now subdued, but low inflation doesn’t necessarily mean lower prices, said Mary Johnson, a senior Citizens League social security and Medicare policy analyst.

This year’s survey shows that the loss of purchasing power improved slightly from 40% to 36% (4 percentage points). However, this year’s figure was one of the most severe losses recorded in the survey, only surpassing the 2022 loss. Last year’s decline was the biggest loss of purchasing power since the survey began in 2010.

read: US consumer price inflation falls below 5% for the first time in two years

how purchasing power is added

According to the Social Security Administration, the average Social Security benefit in 2023 will be $1,827 per month. According to Johnson, maintaining the same level of purchasing power as in 2000 would cost people over 85 who retired before then $516.70.

Prices consumers are paying aren’t rising as fast as they were a year ago, but prices for many key items through February 2023 remain stubbornly high. Mr Johnson said lower inflation points to a much lower COLA next year.

The study compared COLA growth since 2000 with price increases for 38 goods and services commonly used by retirees over the same period. Purchasing power this year was most affected by his 16% increase in dental care costs, along with sharp increases in food, electricity, rental housing, and auto repair and maintenance costs.

Topping the list of fastest growing items? Eggs. No other spending item on the list grew faster during the study reference period comparing average price changes from February 2022 to February 2023.

read: Food prices, including eggs, have slowed, giving consumers a glimmer of hope

“Without an accurate cost of living adjustment (COLA) to meet rising costs, beneficiaries lose purchasing power, especially during the retirement process, which can last 25 to 30 years,” said the Senior Citizens League. “This loss is cumulative and grows deeper as retirees age. The bottom line is that the living standards of older households will fall significantly.”

From January 2000 to February 2023, Social Security COLA increased benefits by 78%, an average annual increase of 3.4%. Meanwhile, the cost of goods and services purchased by the typical retiree increased by an average of about 6.2% annually over the same period, rising 141.4%. For every $100 his retired household spent on groceries in 2000, the household could only buy about $64 in today’s value, the group said.

“For long-term retirees, this has a big impact. .

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