Consumer prices surged 8.5% annually in March, marking the fifth straight month of 40-year-high inflation rates. While soaring inflation undoubtedly impacts all American consumers, it can put a more significant financial burden on seniors who rely on a fixed Social Security income, according to Mary Johnson, a policy analyst the Senior Citizens League (TSCL).
Average Social Security benefits for retirees increased by $92 monthly in 2022 thanks to the 5.9% cost of living adjustment (COLA), but Johnson said this pay bump is insufficient to keep up with the current rate of inflation. She estimates the 2022 COLA has fallen short by $162.60 this year so far due to rising consumer prices.
“Inflation not only means higher prices, for many retirees it also means less savings and more debt,” Johnson said.
The short-term impact of inflation is already being felt by beneficiaries who rely on a fixed Social Security income. A recent TSCL survey found that 43% of older households carry consumer credit card debt, which may become more expensive as the Federal Reserve raises interest rates to offset rising inflation.
Keep reading to learn more about inflation’s impact on Social Security beneficiaries. And if you’re grappling with higher debt payments due to Fed rate hikes, you could consider paying off variable-rate credit cards with a fixed-rate personal loan. This ensures your monthly payments stay the same even as inflation causes interest rates to rise. you can learn more about credit card consolidation on Credible.
WHAT TO KNOW ABOUT SOCIAL SECURITY IN 2022
Older households face ‘declining standard of living’ amid inflation
Recent COLA increases aren’t sufficient to keep up with inflation, according to a TSCL analysis. Social Security benefits have lost 32% of their buying power since 2000, particularly when it comes to costs like food, housing and prescription drugs.
The erosion of Social Security purchasing power many leads seniors to withdraw more from their savings, Johnson said. Inflation can also lessen the value of fixed investments like bonds and certificates of deposit (CDs).
“While these investments are often touted as ‘safer than stocks,’ the total return of either type can erode due to the impacts of inflation,” Johnson said.
With fewer savings and weaker investments, Johnson said that seniors are “faced with a declining standard of living.” In late 2021, TSCL received hundreds of emails from Social Security beneficiaries “describing the dire situations they face as rapidly rising inflation makes it impossible to pay the bills.”
If you’re struggling to keep up with rising costs on a fixed income, one strategy to consider is debt consolidation. It may be possible to lower your monthly debt payments by consolidating credit card balances into a fixed-rate personal loan. You can visit Credible to compare personal loan rates for free without impacting your credit score.
LAWMAKERS CONSIDER SOCIAL SECURITY 2100 ACT AIMED AT PROTECTING FUTURE BENEFITS
Inflation may lead to 8.9% COLA increase in 2023
The Social Security Administration (SSA) determines its annual benefit adjustments using the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), an inflation indicator from the Bureau of Labor Statistics.
While Johnson previously estimated a 7.6% Social Security COLA boost for 2023, she recently amended her prediction to 8.9% as a result of new CPI-W data released in March. If Social Security benefits do increase by 8.9% next year, the average retiree benefit would rise to about $1,804.
This would mark a significant pay raise for Social Security recipients, but it wouldn’t be the first time the SSA has increased benefits at such a high rate. The highest COLA ever recorded was 14.3% in 1980, at a time when inflation was also rising at a breakneck pace.
Still, a long-term adjustment in Social Security benefits won’t help seniors who are struggling to keep up with current rising prices. To offset the short-term impact of surging inflation, TSCL is calling for Congress to issue a $1,400 stimulus check to Social Security recipients.
However, policymakers have not yet announced plans to issue another stimulus payment, which means that retirees may need to find alternative ways to cut costs. One method is by consolidating higher-interest debt into a personal loan at a lower rate. You can browse current interest rates in the table below, and use Credible’s personal loan calculator to estimate your monthly payment.
SOCIAL SECURITY BENEFITS COULD BE SLASHED EARLIER THAN EXPECTED
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