Soaring inflation has ‘deeply eroded’ the buying power of Social Security benefits in 2021
Social Security benefits, despite a recent cost-of-living adjustment of 5.9%, and which is the highest in 40 years, are being hit hard by price increases across the US.
According to a study by Mary Johnson, an analyst with the nonpartisan Senior Citizens League, soaring inflation has “deeply eroded” the buying power of those benefits this year.
Earlier this month the government announced that premiums for Medicare Part B (which covers doctors’ visits) for 2022 would rise 14.5%, one of the biggest jumps in the program’s history, and which will take the standard monthly premium to $170.10 from $148.50.
In a new survey by the Senior Citizens League, 44% of Medicare recipients reported spending between $160 and $495 a month on health care.
“That’s a significant portion of income,” considering that the average monthly Social Security benefit is about $1,487, Johnson said.
“These findings are particularly troubling because about 46% of our survey participants also report that they have no retirement savings to fall back on,” she added.
“Over the past 21 years, COLAs have raised Social Security benefits by 55%, but housing costs rose nearly 118% and health care costs rose 145% over the same period,” Ms. Johnson said. “COLAs are intended to protect the buying power of Social Security benefits, but according to consumer price data through July of 2021, Social Security benefits have lost nearly one-third of their buying power (32%) since 2000.”
It’s hard to outpace these escalating costs with conventional retirement benefits. While Social Security payments are linked to the Consumer Price Index, the cost-of-living adjustment is partly eaten up by increases in those Medicare premiums and other medical expenses. So it’s difficult to keep up with the real cost of health care in retirement unless you plan ahead.
You’ve heard it before, you’ll hear it again: Maximize Social Security benefits through delayed retirement credits.
That means waiting as long as possible, ideally until age 70, before you draw benefits. Your monthly payments will be higher and then augmented by annual cost-of-living percentage adjustments when you do start receiving checks.
“Optimizing Social Security benefits is so important for everyone,” Ms. Cheng, the financial planner, said.
“For married couples, this also means locking in the largest survivor benefit.”
“My parents are 14 years apart. My dad deferred his benefit until age 70. He earned delayed retirement credits, then he locked in the largest benefit for my mom. When he passed away, my mom’s survivor’s benefit was my dad’s benefit,” she said as an example.
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