Retirees’ Expenses Are Increasing. See How This Affects Social Security
The numbers just don’t add up. According to the Social Security Administration (SSA), the average monthly benefit for a retired worker is $1,907, while a Moneywise article cites the Bureau of Labor Statistics as saying the average senior spends $4,345 each month in expenses.
This is a big problem because, according to the SSA, “among Social Security beneficiaries age 65 and older, 12 percent of men and 15 percent of women rely on Social Security for 90 percent or more of their income.” It’s clear to see why so many retirees are struggling financially these days.
The Moneywise article found that seniors spend the most on housing, transportation, healthcare, and food, with those costs adding up to about 75 percent of the average $4,345 monthly expenses. While all ages share these same expenses for seniors, medical and housing expenses often outweigh other expenditures.
Calls for a New COLA Calculator
It’s time Social Security adopts a new formula for calculating the cost-of-living adjustment (COLA) that more accurately measures spending affecting older Americans.
Currently, COLA is calculated using the average inflation rate from the third quarter of the year (July through September), as measured by the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The CPI-W measures the monthly changes in the prices of goods and services.
The problem is that retirees spend most of their income on housing and medical costs. These expenses typically increase faster than overall inflation. So, despite the recent COLA increases, Social Security benefits have not kept up with inflation as it pertains to retirees.
Retiree advocates — like The Seniors Trust — are calling for Social Security to adopt an alternative index known as the Consumer Price Index for the Elderly (CPI-E). It specifically measures inflation on the goods and services most used by adults 62 and older. Using this index to calculate the Social Security COLA would help retirees keep up with inflation better by providing a bigger benefit on average than the CPI-W. If the CPI-E had been used to calculate COLAs over the past 10 years, the average Social Security retirement beneficiary would have received an additional $3,787 in benefits.
The change will be made when Congress enacts the Social Security Expansion Act. Along with setting a fairer COLA, this landmark piece of legislation will also increase benefits by $200 per month and secure Social Security solvency for another 75 years.
