Wake up! Social Security's Real Threat Isn't Insolvency, It's Inflation

"Social Security's trust fund faces funding challenges in the coming years, triggering headlines about benefit cuts and financial doom. But for most retirees, potential policy changes aren't the real threat. The bigger risk is quieter and more relentless: inflation steadily eroding what each monthly check can buy. Understanding this distinction changes how you should think about retirement income and when to claim benefits. Policy debates get attention, but inflation affects every retiree, every year, for decades."

"The inflation risk makes delaying Social Security more valuable than many retirees realize. Each year you wait past full retirement age increases your benefit, creating a higher base for all future COLA increases to compound from. Someone who claims early receives a lower starting amount that adjusts for inflation over time. Waiting longer means those same percentage increases apply to a larger base. Over a multi-decade retirement, that difference compounds substantially as each year's inflation adjustment builds on a larger foundation."

Policy funding concerns attract attention, but steady inflation poses the more consistent threat to retirees' finances by gradually eroding monthly Social Security purchasing power over decades. Cost-of-living adjustments are intended to protect income but consistently lag actual price increases, producing periods when benefits fail to keep up. Healthcare and housing commonly rise faster than the inflation measure used for COLAs, widening the gap between initial benefits and required living expenses. Delaying Social Security raises the base amount for future COLA compounding, and retirement plans should prioritize inflation resistance and coordinated income strategies to preserve purchasing power.

Read at 24/7 Wall St.