Social Security benefits are on pace to lose buying power in 2025

[Knight]

TSCL believes Social Security benefits have lost 20% of their purchasing power since 2010 because COLAs have failed to keep pace with inflation. The root cause of that problem is the CPI-W, and the situation will likely deteriorate further in 2025.

To elaborate, the CPI-W considers inflation across eight major product groups, which are weighted based on workers' spending patterns. But workers are usually young and tend to spend money differently than retired workers on Social Security. For instance, retirees generally spend more on housing and medications and less on transportation and education.

MSN

 

[Harry Le Hermit]

It might be that CPI-W is losing ground for seniors, but I don't think the 40% loss in purchasing power is quite accurate, imo.

Granted CPI-W has lost ground, as evidenced by this chart, with all being at 100, at the same time.

The CPI-W is the lowest of these 3 indicators. However, the kneejerk reaction to switching to R-CPI-E could also be a mistake, as recent history demonstrates...

Some year, the R-CPI-E fails to keep up. (The R-CPI-E cola estimate is based on same criteria as CPI-W)
R-CPI-E was originally called Research-CPI-Experimental, but is now referred to as retiree or elderly, meaning 62 and above.
R-CPI-E could be used, but must a one time adjustment is needed, imho.

 

[Knight]

I read the article as having lost 20% since 2010. Seems reasonable to me the accumulation of loss over the 14 year period.

 

[Harry Le Hermit]

I read the article as having lost 20% since 2010. Seems reasonable to me the accumulation of loss over the 14 year period.

Yes, I misread it. Even 20% in purchasing power seems a bit steep to me. I would agree that housing has increased substantially and may be a much higher weighting in their calculations.

For me, it has been about 9.3% loss in purchasing power. Everyone is different.

 

[papa tiger]

a duh, no crap! The prices have tripled and so you have to stop buying really bad drugs too!
People prices have gone up 300% and the products suck. The beef isn't chewable anymore, let alone swallowable, spit out the cud, cut it apart and you risk all trying to swallow the lil piece too. It's just what total lies are all about! All of them! The crazies always choose war as their way out of screwing all of us.
-----------
It will never end !

 

[papa tiger]

TSCL believes Social Security benefits have lost 20% of their purchasing power since 2010 because COLAs have failed to keep pace with inflation. The root cause of that problem is the CPI-W, and the situation will likely deteriorate further in 2025.

To elaborate, the CPI-W considers inflation across eight major product groups, which are weighted based on workers' spending patterns. But workers are usually young and tend to spend money differently than retired workers on Social Security. For instance, retirees generally spend more on housing and medications and less on transportation and education.

MSN

Everybody shop for or fast food eats, pays for electricity/N.G, buys Jeans & furniture and Popcorn. Most all the rest is just B.S.
The Shafts of the Wind Turbines are breaking off. So, who has insurance for that?

 

[Lethe200]

SS was never guaranteed to keep pace with inflation. Annual COLAs did not even exist until 1975! Before 1975, benefits were increased only when Congress passed special legislation.

 

[Brookswood]

I agree the SS COLA is based on data that probably underestimates the real cost of living increase.

That’s why I keep some money in a total market index fund. That way I have millions of people from CEOs to the office cleanup crew working to increase my income.

 

[Uncle Bozo]

Worrying about the "cost of living" is a consideration that should be addressed no later than age 25.
It amazes me that so few could see the pattern coming way back when it started.

 

[Aunt Bea]

Worrying about the "cost of living" is a consideration that should be addressed no later than age 25.
It amazes me that so few could see the pattern coming way back when it started.

Sad but true.

It’s too late for most of us to do anything that will improve our financial situation.

I’m afraid it’s going to get tougher now that BofA is raising their minimum wage, I’m sure that other large companies will follow in an effort to retain employees.

Don’t get me wrong I’m happy for the young folks but it puts additional inflationary pressure on folks living on Social Security.

 

[That Lady in PA]

SS was never guaranteed to keep pace with inflation. Annual COLAs did not even exist until 1975! Before 1975, benefits were increased only when Congress passed special legislation.

Exactly!
Plus it is only one leg of the "three legged stool"... no one should by relying solely on SS.

 

[Harry Le Hermit]

It appears COLA will be about 2.5%, with 2.4% a real possibility. Which comes into effect in January. So there is likely some loss of purchasing power, but that likelihood has existed throughout my lifetime... when wages after taxes, doesn't keep up with inflation.

 

[dilettante]

The three legs were:

• Social Security
• Pensions
• Savings and Investment

For most people pensions are long gone, even if they'd been available previously. In lieu of that many were only given the investment option of 401(k), 457, IRAs, etc. Unlike most pensions those were voluntary and the contributions made very visibly deducted from pay, so many have very little or nothing there. Savings and regular investments are even more discretionary and a lot of things in life placed demands on that money first.

So for any number of reasons like field of employment, family tragedy, and yes poor choices... many end up completely or nearly completely depending on Social Security. Choices and chances also may make that Social Security check small, maybe even the minimum.

But this is all obvious, or should be. The worst off are low earners and not-so-bright medium and even high earners who wasted rather than saving, chose pensionless fields of employment, took cash under the table, etc.

 

[Don M.]

SS was never intended to be a "sole" source of income. People Must begin saving/investing fairly early in their working years if they want a stress free retirement. With very few companies still offering pension plans, so much of the burden falls on the individuals, themselves.

 

[Remy]

I just looked at my online statement and it says I will get more than I had thought. In fact the monthly payment is more than the last time I looked. I hope this is correct. Because for me, it's helpful.

 

[Harry Le Hermit]

Early in my working career, it was largely considered that S.S. would not be around when I retired, as it was near broke. Then S.S. was supposedly fixed in the 80s. By then, I was setting aside money for that eventual retirement and was living modestly. I would continue that lifestyle and possibly retire early. I sometimes think people misunderstood that "fix".

I seem to recall it being noted at that time... additional measures would be necessary, as the fix was only valid for about 50 years. Plenty of time to take those additional measures. Guess what?!?

 

[Uncle Bozo]

No worries. The grandkids will take us seniors in, feed us, and keep us happy and healthy.

 

[Remy]

I think I may have figured out why my estimated income for social security has gone up. I forgot they go by your 35 highest years of earning. When I checked 10 years ago and more, they still would have been counting what I made in my 20's to early 30's. Low income. And I mean low. Perhaps the better 35 years now is helping.

 

[mathjak107]

the cpi is not ANYONES PERSONAL COST OF LIVING INDICATOR.

It is only a price change index taking the temperature of loads of goods and services in the 1500 mini economies that make up this country .

it includes loads of goods and services you don’t use .

a personal cost of living index would have to include how many times you buy something.

it would have to account for quality… higher end goods see higher price increases that last longer .

it would have to include out of class substitutions you do .

there are loads of products i sub if something isn’t on sale . the cpi will not do that out of type

anyone thinking the cpi reflects their personal expenses is delusional.

 

[CarolfromTX]

With the inflation rate the way it has been, everybody’s pension has lost buying power. Inflation makes us all losers. Inflation isn’t Caused by “greedy “ businesses. It’s caused by government spending money it doesn’t have, and running the printing presses to pay for it.

 

[mathjak107]

With the inflation rate the way it has been, everybody’s pension has lost buying power. Inflation makes us all losers. Inflation isn’t Caused by “greedy “ businesses. It’s caused by government spending money it doesn’t have, and running the printing presses to pay for it.

there are many different types of inflation.

that is monetary inflation .

there is also demand pull and also cost push inflation .

all-three types cause inflation

 

[CarolfromTX]

Yeah, well, what’s mainly happening now is monetary inflation because during Covid the government handed out money like it was jelly beans, and much of that was put to fraudulent use. To paraphrase Ronald Reagan, inflation isn’t caused by the people living too well; it’s caused by the government living too well. Regardless of what kind it is, inflation is eating into my teachers pension big time.

 

[mathjak107]

Yeah, well, what’s mainly happening now is monetary inflation because during Covid the government handed out money like it was jelly beans, and much of that was put to fraudulent use. To paraphrase Ronald Reagan, inflation isn’t caused by the people living too well; it’s caused by the government living too well. Regardless of what kind it is, inflation is eating into my teachers pension big time.

“ In the wake of the Covid crisis, there was an acute labor shortage that set the stage for labor hoarding, which continues today, especially at smaller businesses. That constrained labor supply collided with enormous monetary stimulus – plus many trillions in fiscal stimulus – way beyond anything seen during past recessions, including the 2007-09 Great Recession. “

 

[CarolfromTX]

Like I said, the government ran the printing presses overtime.

 

[OneEyedDiva]

I thought SS benefits had already lost buying power with each COLA.