Social Security benefits have lost 30 percent of buying power since 2000, according to the latest Social Security Loss of Buying Power study released this month by The Senior Citizens League (TSCL). TSCL also estimates the 2021 cost-of-living adjustment (COLA) for Social Security benefits could be zero, based on consumer price index (CPI) data through April of this year.
The estimate for the 2021 COLA might change, however, since there are still five months of consumer price index data to be collected before the Social Security Administration announces the COLA in October.
The 2020 COLA was 1.6 percent for Civil Service Retirement System (CSRS) annuities, Federal Employees Retirement System (FERS) annuities and Social Security benefits. That was a a lower federal retiree COLA than 2019 when CSRS annuitants received 2.8 percent and FERS annuitants received 2 percent.
“This year’s study found a 3 percentage point gain in the buying power of Social Security benefits over 2019,” says study author Mary Johnson, a Social Security policy analyst for TSCL. “That should indicate that most retirees may have seen at least some prices come down on certain items — such as lower electric bills, as well as lower prices on eggs, fresh fruits, and vegetables.
“On the other hand, when there are lower prices — this is a signal of deflation — which means a lower cost-of-living adjustment (COLA) is on the way,” Johnson says.
“The recent unprecedented plunge oil prices have all but wiped out the prospect of a Social Security cost-of-living adjustment (COLA) for next year,” Johnson says.
The study, which examined price changes from January of 2019 to January of this year, found that, since 2000, the buying power of Social Security benefits improved 3 percentage points in 2020— from a loss of 33 percent as of 2019 to 30 percent in 2020. Between January of 2000 and January of 2020, Social Security COLAs increased Social Security benefits by 53 percent, but the costs of goods and services purchased by typical retirees rose almost twice as much — 99.3 percent. Medicare premiums and out-of-pocket costs, housing, and homeowner’s insurance— were among the most rapidly – rising costs over the past year.
Participants in The Senior Citizens League’s surveys indicate that household medical expenses consume a significant portion of their monthly income. More than 39 percent of respondents to a recent survey say that they spend more than $750 per month on all Medicare and other healthcare costs. In 2020, the average Social Security benefit is $1,460. The 1.6 percent COLA raised the average Social Security benefit by only $23.40 per month this year.
The following chart provided by TSCL illustrates ten of the fastest growing retiree costs since 2000:
To read a the full Social Security Loss of Buying Power study by The Senior Citizens League, go here.