The Social Security Shell Game

Shell game with three cups - The Social Security Shell GameA friend sent me a recent announcement about the Social Security Cost-of-Living Adjustment (COLA) for 2021.

“Social Security and Supplemental Security Income (SSI) benefits for approximately 70 million Americans will increase 1.3 percent in 2021.

The 1.3 percent cost-of-living adjustment (COLA) will begin with benefits payable to more than 64 million Social Security beneficiaries in January 2021.”

Brian Anderson tells us, “The average Social Security benefit was $1,503 per month in January 2020.”

The average recipient is going to get a $19.54/month COLA increase. I sarcastically responded with “whoopee!”

They make a great fanfare out of telling recipients about their increases.

COLA Social Security Chart

Since January 2010, COLA increases have averaged 1.375%.

As a 15-year Social Security recipient, I know in December they send out the notification about how much you will receive the following month. Most, if not all, of the increase, is taken back with increases in Medicare Premiums.

Brian Anderson continues:

“Social Security benefits have lost 33% of buying power since 2000. TSCL’s (The Senior Citizens League) analysis found that, over a 10-year period, average Social Security benefits of $1,075 per month in 2009 lost a total of $15,258 in financial growth from 2010 to 2019 when compared to the previous decade when COLAs averaged 3%.”

Why don’t benefits keep up?

Wolf Richter explains, “Status of the Social Security Trust Fund, Fiscal 2020: Beware of Vicious Dog”:

“These annual adjustments are based on a formula that uses the “Consumer Price Index for All Urban Wage Earners and Clerical Workers” (CPI-W).

…. Actual costs of living for retirees – or really for anyone – are going to increase far faster, depending on where they live, how they live, and where they spend much of their money. Even if the actual cost of living increases by only 1 percentage point faster than the annual COLA every year, after 10 years, 20 years, or 30 years, you’re talking about a serious deterioration in purchasing power of the Social Security payments. Inflation will eat more than retirees’ lunch.

So, Social Security will be there for you, but…

You can rely on the Social Security payments. But they will lose purchasing power. The purchasing power of the payments will diminish every year, year after year, because the COLAs are not enough to cover the actual increases in the cost of living.

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