Retired & Feeling Pinched By Smaller Social Security Payments? You're Not Alone
If America is seeing a significant uptick in the number of grumpy old men – and women – one reason might well be the big shortfall during 2022 between inflation and their Social Security payments.
According to the nonpartisan Senior Citizens League, between this 2022’s rabid increase in the cost of living and the inflation adjustment given to Social Security recipients, there was a 46% gap between 2022’s historic inflation and the monthly benefit checks received by 70 million Americans.
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Here’s how the math works out:
Last January, Social Security recipients received a 5.9% cost-of-living-adjustment (COLA), which upped the average benefit check from, $1,564 in 2021 to $1,656.30 for 2022, and an increase of $92.30.
In June, the reported rate of inflation compared with June 2021 hit a shocking high for the year of 9.8%. The year started with a rate of 8.2% in January and finally dipped to 7.1% in November.
The 5.9% inflation adjustment fell short of actual inflation every month by 46% on average, the league reported, leaving the average Social Security benefit short by more than $42 per month and more than $508 for the year.
“While Social Security recipients are looking forward to an 8.7% increase in Social Security benefits in January, inflation in 2022 has taken a toll on retiree budgets,” according to a statement from the league. “Many retirees have been forced to spend through savings far more quickly than planned and those without savings have turned to food pantries and low-income assistance programs in higher numbers.”
The annual inflation rate for 2021 – as measured by the headline-grabbing Consumer Price Index – was 7%. However, the adjustment for Social Security benefits is calculated based on the change between the third quarters of the similar Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). In the third quarter of 2021, CPI-W increased by 5.9%. But by the end of the fourth quarter that rate had jumped to 7.4%, leaving seniors short before 2022 had even begun.
Federal government agencies are forecasting that 2022 will end with an annual inflation rate between 7% and 8.01% when the final numbers for the year are announced on Jan. 12, according to the data research firm Knoema. In August, the consensus from the Federal Reserve Bank of Philadelphia’s Survey of Professional Forecasters (SPF) was that the CPI inflation rate will decline from 7.5% in 2022 to 3.2% in 2023 and to 2.5% in 2024.
Recent surveys from The Senior Citizens League reported that 33% of the senior citizens surveyed applied for food stamps or visited a food pantry this year, compared with 22% last year, and that 17% applied for assistance with heating costs, compared with 10% last year.
Now in January 2023, the average monthly benefit amount has increased by about $140, increasing the average check to nearly $1,800.
“While Social Security recipients are looking forward to an 8.7% increase in Social Security benefits in January, inflation in 2022 has taken a toll on retiree budgets,” the group’s statement reads. “Many retirees have been forced to spend through savings far more quickly than planned and those without savings have turned to food pantries and low-income assistance programs in higher numbers.”
Despite an 8.7% increase in Social Security payments in 2023, seniors are still contending with a big shortfall from 2022, amid inflation and their Social Security payments. The Senior Citizens League reported that between 2022’s increase in the cost of living and the inflation adjustment given to Social Security recipients there was a 46% gap between 2022’s historic inflation and the monthly benefit checks received by 70 million Americans.
Tips for Retirement Planning
Saving is important but most people aren’t likely to stow away enough to last all of their golden years. Likewise, Social Security can help but it isn’t likely to sustain your current lifestyle. Instead, you will likely need your savings to grow through investments. For help with this, consider working with a financial advisor. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Taxes can take a big chunk out of your retirement income, depending on where you live. To find out if you should relocate after you hang up your hat, check our story on the best states to retire for taxes.
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