Retire Better: Seniors get the biggest Social Security raise in years — and it’s already been eaten up by inflation
It was only a month ago that seniors got some very good news: Social Security was getting a 5.9% cost of living adjustment (COLA) to help them keep up with inflation.
Turns out, even that hike—the biggest in years—isn’t enough. That’s because prices are now rising even faster than that. The Labor Department said Wednesday that the consumer-price index—which measures what Americans pay for goods and services—rose by 6.2% last month from a year ago. It’s the biggest 12-month rise since 1990, and the fifth straight month over 5%.
Here’s how the price increases break down—again this is compared with a year ago:
Utility gas service: 28.1%
Used cars/trucks: 26.4%
Meat, poultry, fish, eggs: 11.9%
New vehicles: 9.8%
Car maintenance: 5.4%
All food: 5.3%
You might look at this and point out that two absolutely indispensable items—“all food” and “rent” are actually well below 6.2%. That’s good, right? Perhaps, but have rental costs really gone up just 2.7% over the past year? If your home is heated or cooled by natural gas, just look at the whopping 28% gain for the “utility gas” category. If you’re in a rental and utilities are covered by a landlord, you can be sure that these costs will eventually be passed on to you in the form of higher rents. I’d argue that true housing costs are up—or at least soon will be up—more than 2.7%. Instead of turning up the heat to stay warm this winter, consider putting on an extra layer of clothing,
And meat, poultry, fish and eggs are up nearly 12%, but the “all food” category is up 5.3%? That doesn’t sound right to me. You could certainly survive (and probably be healthier) eating nothing but fruits and vegetables (up 3.0%), but most people won’t/can’t do this. No poultry, fish, meat or eggs? Not exactly realistic.
Parsing about the individual categories aside, it’s important to remember the bottom line here: the cost of living adjustment that seniors get each year is only supposed to keep up with inflation, not exceed it. It is calculated to help seniors maintain their standard of living, but not improve it.
There is no margin for error, then, when inflation exceeds the COLA.
Frankly, even before Wednesday’s bad inflation data, you could argue that seniors—even with a 5.9% cost of living adjustment—were falling behind. Look at the above categories. What’s missing? One big source of senior spending: Healthcare.
How big? As I’ve mentioned many times, the average couple retiring this year at age 65 will need an extra $300,000 to pay for healthcare that Medicare and Medicaid don’t cover. That figure, adjusted upward each spring by is calculated by Fidelity Investments, the Boston-based asset management giant, has increased about 88% since 2002.
To adjust Social Security each year without taking these things into better consideration is frankly nuts, but that’s the way the government does it. A big cost of living adjustment not withstanding, millions of seniors are falling further behind.