Social Security stimulus payment proposal, Digi Mart USA News: Social Security benefits have been losing buying power over time. Many retirees rely on Social Security alone, and seniors without other income often struggle to make ends meet.
The average monthly retirement benefit is about $2,089, which adds up to roughly $25,000 in income per year. A major problem, according to the source, is the formula used to calculate Social Security cost-of-living adjustments, or COLAs.
Social Security COLAs are based on changes to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) from the third quarter of the year. Benefits rise when the CPI-W increases for July through September and stay flat if it shows a decrease.
The source says the CPI-W does not accurately capture the costs Social Security recipients face, because it measures price changes for wage earners rather than retirees, who spend money differently. As a result, the source states that benefits have failed to keep up with inflation despite annual COLAs.
The Senior Citizens League estimates that Social Security benefits have lost 13.7% of their buying power since 2016 due to COLAs that have not held up. The group is pushing Congress to issue recipients a one-time stimulus payment of $3,550.20 to “at least partially refund people for years of lagging COLAs.” It also advocates a new COLA formula based on the Consumer Price Index for the Elderly.
The source describes a one-time payment as unlikely. It notes there is no precedent for refunding seniors over insufficient COLAs, and argues the current formula is defensible because it measures broad inflation.
It also cites Social Security’s funding shortfall, which could soon result in benefit cuts, and says large stimulus checks would strain the program’s limited resources.
For retirees who depend heavily on Social Security, the source suggests supplementing income by working part-time, which is permitted while collecting benefits, or renting out space in a home. It also advises that retiring on Social Security alone is one of the biggest financial mistakes a person can make, and recommends saving through a 401(k) or IRA and holding income-producing investments such as dividend stocks and bonds.
