People who are trying to survive on Social Security benefits have found the prospect increasingly more difficult year-after-year because since 2000, the buying power has fallen by 34 percent according to a report from the Senior Citizens League, as reported in this article by CNBC.
The main factor contributing to this decline in buying power for Social Security beneficiaries is that the costs of goods and services purchased by beneficiaries has risen faster than Social Security’s cost-of-living adjustment (COLA).
The two major areas where costs have increased faster than Social Security’s COLA are housing and medical costs and these are two enormous expenses for retirees and the disabled. Below are some specific costs related to medical and housing expenses that increased drastically since 2000 and have contributed to a decrease in Social Security buying power. Below, a graph of the price change on costs between 2000 and 2018, courtesy of the Senior Citizens League, is an example of Social Security’s reduced buying power.
2000 2018 Increase
- Medicare Part B monthly premiums $45.50 $134 195 percent
- Out-of-pocket prescription drug cost $1,102 $3,172.72 188 percent
- Home heating oil (gallon) $1.15 $3.22 181 percent
- Medigap (extra healthcare coverage) $119 $306.64 158 percent
- Propane (gallon) $1.01 $2.60 157 percent
- Real estate taxes $690 $1,579.06 129 percent
Social Security’s COLA is decided by the Consumer Price Index for Urban Wage Earners and Clerical Workers and has been since 2000. Because Social Security COLA is decided by this price index Social Security buying power will continue to decline because the formula fails to consider the different spending patters exhibited by retirees compared to entire U.S. population, according to critics of the price index. Those who want to switch price indexes to determine Social Security COLA have suggested the Consumer Price Index for the Elderly.
