Social Security's Buying Power Has Dropped

Social Security's Buying Power Has Dropped

Social Security benefits have lost one third of their buying power since 2000, according to a report released Tuesday by The Senior Citizens League, a non-profit organization.¹

Rising Costs

Retirees’ monthly benefit checks have not kept up with the skyrocketing costs of prescription drugs and other essential goods and services, resulting in a 33% drop in purchasing power.¹

Senior Expenses

Since 2000, typical expenses for seniors have risen twice as fast as the yearly cost-of-living adjustment (COLA) to Social Security, the report says. This annual raise is supposed to counteract the impact of inflation on Social Security, and while benefits rose 2.8% for 2019 (the highest increase since 2012), it is not enough to compensate for the mounting bills that seniors have to pay.¹

Top 10 Fastest Growing Costs of Older Americans Since 2000²

Prescription drug prices have increased 253% since 2000 and Medicare Part B premiums have risen almost 200%, along with items like home owners’ insurance and real estate taxes, according to the report.¹

ITEM

COST IN 2000
(AVERAGE COST OR NUMERIC DATA)

Cost in 2018
(average cost)

Percent increase

Prescription drugs, generic, brand, special, average out-of-pocket
(annual)

$1,102.00

$3,891.90

253%

Homeowner’s insurance
(annual)

$508.00

$1,518.97

199%

Medicare part b premiums
(monthly)

$45.50

$135.50

198%

Home heating oil
(gallon)

$1.15

$3.09

170%

10 lbs. potatoes
(gold)

$2.98

$7.98

168%

Propane gas
(gal.)

$1.01

$2.43

141%

Medigap
(average monthly premium, all plans)

$119

$279.55

135%

Real estate tax
(annual)

$690

$1,579.06

129%

Total medical costs, not including premiums
(annual)

$6,140

$13,665

123%

Oranges
(lb.)

$0.61

$1.34

120%

Social Security

The average monthly Social Security benefit in 2000 was $816.60 a month, and someone who collected that amount 19 years ago would have $1,226.60 today, thanks to the annual cost-of-living boost. However, to retain the same purchasing power as $816 in 2000, the monthly check would need to be $1,634.50. Meanwhile, the average check for all retirees is $1,461. This puts the 60 million Americans who collect Social Security at risk for a declining standard of living — particularly the more than two thirds who rely on Social Security as their main source of income.¹

ProNvest Can Help

Retirement savers should not rely on Social Security alone. What Social Security looks like for those retiring today may be different for those retiring much later in life. By going through the ProNvest Retirement Planner, you have the option to include or not include Social Security in your retirement analysis. If you are concerned about the outlook of Social Security, you can plan ahead and strategize what steps to take with your workplace retirement plan. We can also include your other savings vehicles into our analysis to create a complete picture of your retirement.

Either way, it's important to not solely rely on Social Security and, instead, proactively be involved with workplace retirement plans and other savings vehicles.

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Citations.
1 - http://money.com/money/5644560/social-securitys-buying-power-has-dropped-a-whopping-33-since-2000-heres-what-the-average-check-is-now/
2 - https://seniorsleague.org/assets/Top-10-Fastest-Growing-Costs-of-Older-Americans-Since-2000.pdf