About 66 million seniors, disabled Americans and others rely on Social Security for monthly retirement income that can cover some, and often all, of their bills. But this year’s cost-of-living adjustment is lagging the highest inflation in 40 years, eating into seniors’ buying power.
Many seniors are hoping that 2023 will provide some respite from from painfully high inflation, with the Social Security Administration expected to announce on October 13 the largest cost-of-living adjustment for the program’s recipients since 1981. But, experts caution, it’s not clear whether a benefit hike — expected to land between 8% and 9% — will keep seniors from losing more ground.
Many older Americans say they are cutting back on basics like food and medicine in order to stay afloat, according to surveys from the Senior Citizens League, a nonpartisan advocacy group. The pinch is even more extreme for those who rely on Social Security as their sole source of income, given that the average benefit payment rose 5.9% this year to $1,658, failing to keep pace with annualized inflation that has topped 8%.
“I’ve been cautioning everybody about talking about improvement in buying power” in 2023, said Mary Johnson, Social Security and Medicare policy analyst at the Senior Citizens League. “We don’t know that yet — it all depends on if inflation goes down in October, November and December, or if it moderates.”
Johnson expressed concern by the most recent uptick in gasoline prices, with costs at the pump rising nearly 10 cents per gallon over the last month. Heating and electric bills are also expected to jump this winter, with the average household paying about 17% more to heat their property, according to a forecast from the nonprofit National Energy Assistance Directors Association. Winter heating costs could reach a 10-year high of about $1,200 per home.
Even before inflation spiked in 2022, more seniors were falling into poverty, according to Census data released last month. Last year, the ranks of poor seniors swelled by almost 1 million, or an increase of 1.4 percentage points, while child poverty fell and adult poverty was unchanged.
Winter heating worries
Heating costs are weighing on Tami Sue Mulder, a 63-year-old who lives in Freeport, Illinois, where the average low temperature in January is 10 degrees Fahrenheit. A disabled widow, Mulder lives on her Social Security disability payments of about $1,600 a month. She said a neighbor who is on a 12-month natural gas payment plan saw her bill recently reset for the upcoming year, tripling to $180 per month.
That is causing Mulder to worry about what she’ll face additional costs she may face as winter approach. Her natural gas bills have already jumped from $15 to $45 a month, prompting her to cut back on using her stove and switch to an electric counter-top appliance.
“I’m not looking forward to this winter,” said Mulder, who said even a generous COLA increase may not cover all of her expenses. For instance, a 10% boost in monthly benefits would provide her with an additional $160 per month.
“If it’s a mild winter, that will just cover the extra expense of heating my home,” she said. “It won’t cover the increased price of gas for my car, medication increases — it won’t help with any of that.”
Such price hikes could mean that a cost-of-living adjustment of 8.7% — the Senior Citizens League’s forecast for the 2023 COLA — may not be enough to restore the purchasing power of older Americans. Based on the group’s forecast, seniors would receive an average monthly increase of $144.10, or about $1,729 for 2023.
“If prices continue to rise, then we will continue to have a similar problem to what we saw in 2022, which are shortfalls,” Johnson said.
To be sure, economists forecast that inflation will moderate later this year and throughout 2023. Yet costs have remained stubbornly high, with prices jumping 8.3% in August, higher than analysts had forecasted. The Consumer Price Index (CPI), a basket of goods and services that reflects consumer purchases, likely rose 8.1% in September, according to economists surveyed by FactSet.
Inflation data for September will be released on October 13, the same day the Social Security Administration is expected to announce its 2023 cost-of-living adjustment.
“Pushed right to the edge”
Johnson said she receives emails from seniors who are stressed and anxious about their dwindling purchasing power, which is causing them to scale back on expenses that can have long-term impacts. For instance, some seniors report cutting back on medications, which can lead to health complications.
“People have been pushed right to the edge,” Johnson said. “People have cut down the amount of food they are getting, as food consumption is their fastest growing cost. The next cost is housing, and that is causing enormous stress when leases come up for renewal. And third, they report, is gasoline and energy prices.”
She added, “Some people don’t have resources and are being forced into difficult decisions, including moving.”
Even before inflation surged in 2022, Social Security benefits fell short of covering essential costs across the nation, according to research published in April from the University of Massachusetts Boston. In 2021, the typical benefit covered 68% of the cost of living for a single senior renting their home and 81% for an older couple, the analysis found.
That’s a serious problem for millions of seniors like Mulder who rely on Social Security as their sole or major source of income, the researchers noted. About 25% of seniors draw roughly 90 cents out of every $1 of income from the program, they added.
“A lot of people are worried,” Mulder said. “It’s a scary time.”
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