Why Retirees Can’t Live on Social Security Alone

Inflation is taking a toll on most Americans, but especially retirees living on a fixed income. To help shield Social Security retirement benefits from the impacts of inflation, there is an annual cost-of-living adjustment (COLA).

The problem is, according to The Motley Fool, the way the COLA is calculated, it does not keep up with rising costs as they relate to retirees. Seniors have lost 20 percent of their buying power over the past 15 years alone.

To better help retirees financially, many senior advocates, including The Seniors Trust, are calling for a change to how the COLA is calculated.

Calls for a New Calculator

The article explains that the “current index Social Security COLAs are based on is the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The problem is that the CPI-W does not do a good job of capturing the costs retirees face.”

A better choice would be to base Social Security COLAs on the Consumer Price Index for the Elderly instead. That index puts more weight on spending categories like healthcare that tend to be a huge expense for seniors in particular. 

Need Bigger Benefits

Even if the COLA calculator were to change, many seniors would still struggle to make ends meet. That’s because Social Security only replaces about 40 percent of what you earned when working.

Retirees need bigger benefits. If Congress doesn’t act soon, retirees will be in trouble because benefits are only going to shrink. That’s because Social Security is facing a looming deficit. Its trust fund is running out and could be depleted in less than ten years. At that time, there will be no choice but to slash benefits.

A Solid Solution

However, there is still hope if we can convince Congress to enact the Social Security Expansion Act. This landmark piece of legislation will:

• Expand Social Security benefits across the board for current and new beneficiaries. Under this bill, Social Security benefits for someone turning 62 next year would be $200 per month higher. That’s welcome news during this time of record-high inflation.
• Increase Cost-of-Living Adjustments (COLAs). This bill would more accurately measure spending patterns of seniors by adopting the Consumer Price Index for the Elderly (CPI-E), which would change the formula to reflect what seniors spend a disproportionate amount of their income on, such as health care and prescription drugs.
• Extend the solvency of the Social Security trust fund through 2096 by requiring the wealthiest Americans to pay their fair share. This legislation would lift the income tax cap, which currently stands at $176,100, and subject all income above $250,000 to additional Social Security Payroll tax. Under this bill, more than 93 percent of households would not see their taxes go up by one penny.