Finance
Social Security benefits have lost 20% of buying power since 2010. The problem could soon get worse
Ramsey Solutions personality Jade Warshaw breaks down how to get the most out of your Social Security check and more on ‘The Bottom Line.’
High inflation is continuing to wreak havoc on older Americans’ finances.
New research published by the Senior Citizens League, a nonpartisan group that focuses on issues relating to older Americans, estimated that Social Security benefits have lost 20% of their buying power since 2010. On average, payments for retired workers would need to rise by $4,440 per year, or $370 per month, to compensate for that lost value.
“The study confirms that prices older consumers are paying have outstripped cost-of-living adjustments (COLAs), leaving many on the edge of financial distress,” the report said.
Between 2010 and 2024, benefits have risen by about 58%, thanks to the annual COLA. Yet the cost of most goods and services purchased by the typical retiree rose 73% during that same time period.
THE ‘MAGIC NUMBER’ TO RETIRE COMFORTABLY HITS NEW ALL-TIME HIGH
A Social Security card sits alongside checks from the U.S. Treasury in Washington, D.C., on Oct. 14, 2021. (Kevin Dietsch/Getty Images / Getty Images)
The problem may soon get worse.
Recipients are on track to receive a 2.63% COLA in 2025, which is below the current 3% pace of inflation. It would mark the lowest annual COLA since 2021. The Social Security Administration will release the final adjustment percentage in mid-October.
In the 1990s and early 2000s, about 60% of the cost-of-living increases beat the inflation rate, while in the 2010s, only 40% did. Through the 2020s so far, just one cost-of-living increase — a record 8.7% bump in 2023 — has done so.
“The reality is that COLAs have become less and less likely to match inflation over time,” the report said.
AMERICANS ARE WORRIED ABOUT OUTLIVING THEIR RETIREMENT SAVINGS
Social Security recipients are on track to receive a 2.63% cost-of-living adjustment in 2025, which is below the current 3% pace of inflation. (iStock / iStock)
Consumers are grappling with a number of financial headwinds, including steep interest rates and ongoing inflation that has made the cost of just about everything from rent to gasoline to groceries more expensive. The burden is disproportionately borne by low-income Americans, whose already stretched paychecks are heavily affected by price fluctuations.
While inflation has fallen considerably from a peak of 9.1% notched during June 2022, it remains above the Federal Reserve’s 2% goal. And when compared with January 2021, before the inflation crisis began, prices are up nearly 20%.
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The uncertain economic landscape has many Americans reconsidering whether retirement is a realistic goal.
More than one-quarter of all non-retired investors said they would likely be forced to return to the workforce at some point due to inadequate savings if they were to retire within the next 12 months, and 19% doubt they will ever save up enough money to retire, according to separate survey data from Nationwide.
“Americans believe they will need over $1 million to retire comfortably, a figure that could be discouraging for even the most committed retirement savers,” said Rona Guymon, senior vice president of Nationwide annuity distribution.
‘The Big Money Show’ co-hosts discuss buy now, pay later spending options and the impact it will now have on your credit score.
Small, everyday purchases like a meal from DoorDash are now able to be financed through eat now, pay later options — a practice that some experts deem “predatory.”
“You’ve got to have enough sense to not follow the urge to finance a taco, okay? You have got to be an adult,” career coach Ken Coleman told “The Big Money Show,” Wednesday.
“This is predatory, and it’s going to get a lot of people in deep trouble.”
RISKS OF BUY NOW, PAY LATER: ‘TICKET TO OVERSPENDING,’ EXPERT SAYS
DoorDash and Klarna are now partnering up to extend buy now, pay later options to consumers. (Reuters, Getty / Getty Images)
Financial wellness experts are continuously sounding the alarm to cash-strapped consumers, warning them of the devastating impact this financial strategy could have on their credit score as some lenders will begin reporting those loans to credit agencies.
Consumers may risk getting hit with late fees and interest rates, similar to credit cards.
“So your sandwich might show up on your FICO score, especially if you pay for it late,” FOX Business’ Jackie DeAngelis explained.
EXPERTS WARN HIDDEN RISKS OF BUY NOW, PAY LATER
Major players like Affirm, Afterpay, and Klarna have risen to prominence at a time when Americans continue to grapple with persisting inflation, high interest rates and student loan payments, which resumed in October 2023 after a pause due to the COVID-19 pandemic.
Ramsey Solutions personal finance expert and ‘The Ramsey Show’ co-host George Kamel discusses the ‘buy now, pay later’ craze and the trend that celebrates the financial benefits of being childless.
“The Big Money Show” co-host Taylor Riggs offered a different perspective, suggesting that company CEOs have a “duty” to attract as many customers as they want.
“Unfortunately for me, this always comes down to financial literacy — which I know is so much in your heart about training people to save now by later,” she told Coleman, who regularly offers financial advice to callers on “The Ramsey Show.”
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Coleman continued to come to the defense of financially “desperate” consumers, arguing that companies are targeting “immature” customers.
“I’m for American businesses being able to do whatever they want to do under the law. That’s fine. But let’s still call it what it is: it’s predatory, and they know who their customers are,” Coleman concluded, “And I’m telling you, they’re talking about weak-minded, immature, desperate people.”
FOX Business’ Daniella Genovese contributed to this report.
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