Social Security's annual cost-of-living adjustments (COLAs) were designed to help retirees keep up with inflation. Many retirees depend solely on Social Security for income, and data shows that median retirement savings among older Americans is only $200,000. Without COLAs, many seniors would struggle with basic living expenses. However, COLAs have not kept pace with inflation, resulting in lost buying power for baby boomers. This trend is expected to continue unless legislative changes are made to enhance adjustments based on the cost of living.
The reality is that many retirees today have only Social Security to turn to for income. And while a good number of older Americans have savings, many don't have a lot.
As of 2022, the median retirement savings balance among Americans ages 65 to 74 was only $200,000, according to data from the Federal Reserve.
Social Security's COLAs may not be doing as good a job of fighting inflation as some people might think. Baby boomers on Social Security have been losing buying power through the years because their COLAs have fallen short.
Social Security COLAs are calculated based on an index called the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). When there's a rise in the CPI-W from one year to the next, Social Security benefits increase.
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