This article caught my eye this morning. Keep in mind, the average Social Security disability benefit payment for 2019 is $1,234.00.
By ALIX LANGONE
Social Security benefits have lost one third of their buying power since 2000, according to a report released Tuesday by The Senior Citizens League, a non-profit organization.
Retirees’ monthly benefit checks have not kept up with the skyrocketing costs of prescription drugs and other essential goods and services, resulting in a 33% drop in purchasing power.
Since 2000, typical expenses for seniors have risen twice as fast as the yearly cost-of-living adjustment (COLA) to Social Security, the report says. This annual raise is supposed to counteract the impact of inflation on Social Security, and while benefits rose 2.8% for 2019 (the highest increase since 2012), it is not enough to compensate for the mounting bills that seniors have to pay. The cost-of-living adjustment is based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The bump to benefits was 2.0% in 2018, 0.3% in 2017 and there was no adjustment at all in 2016.
Prescription drug prices have increased 253% since 2000 and Medicare Part B premiums have risen almost 200%, along with items like home owners’ insurance and real estate taxes, according to the report.
The average monthly Social Security benefit in 2000 was $816.60 a month, and someone who collected that amount 19 years ago would have $1,226.60 today, thanks to the annual cost-of-living boost. But that still falls short: to retain the same purchasing power as $816 in 2000, the monthly check would need to be $1,634.50, according to the report. Meanwhile, the average check for all retirees is $1,461, according to the Social Security Administration.
This puts the 60 million Americans who collect Social Security at risk for a declining standard of living — particularly the more than two thirds who rely on Social Security as their main source of income.
Johnson believes a better way to offset inflation in Social Security benefits is by using the Consumer Price Index for the Elderly (CPI-E), which does track the spending of retired people age 62 and older; Congress would need to pass legislation to make any changes to the COLA calculation.
“As people live longer in retirement, their savings have to go a lot farther, and their Social Security benefits have to be adequate to last for 25 or 35 years,” Johnson says.
She estimates the cost-of-living adjustment for Social Security in 2020 will be around 1.7%.
by Paul B. Burkhalter Managing Partner of Morgan & Weisbrod, Board Certified in Social Security Disability Law.