The government adjusts Social Security benefits yearly to align with inflation, but some estimates show beneficia𒊎ries may be losing purchasing power.

The Social Security Administration announced the annual cost-of-living adjustment (COLA) for 2025 on Thursday, 澳洲幸运5官方开奖结果体彩网:increasing benefits by 2.5%𝔍. The benefits increase will be paid starting in January𒆙.

Social security adjustments have been criticized for lagging behind inflation, as the Social Security Administration calculates th꧟e benefit increases based on the third-quarter annual inflation rate for the prior year.

The nonpartisan advocacy group The Senior Citizens League (TSCL) estimates that lag has cost enrollees 20% of their buying power over 14 years. The Social Security Administration would have to increase the average payment by $4,440 per year or $370 a month to recover the lost value, they estimate.

Investopedia spoke with Shannon Benton, executive director of The Senior Ci♐tizens League, about how enrollees should adjust their budgets to contend with less purchasing power. The interview has been edited for brevity and clarity.

INVESTOPEDIA: How are Social Security enrollees’ budgets affected by this loss in buying power?

SHANNON BENTON: We did a recent survey, and 62% of seniors say having enough money to cover bare essentials is one of their top retirement concerns. So half of seniors are saying that they're concerned about making ends meet in retirement.

I think most of them are doing what they can, but unfortunately, a lot of them are also carrying credit card debt. They're getting stuck with that compounding interest, which compounds the problem. 

Beneficiaries are having to cut back. There's no wiggle room for them financially, for many of them, to experience the joys of everyday life that you and I would. They can't afford to go to the movies, some of them can't even afford to get cable or Internet access to their house. They're down to the bare bones. I know that they're shopping more at farmer’s markets and food banks and getting SNAP benefits if they qualify for them, but a lot of them are just worrying. 

They are also dipping into their retirement savings. A lot of folks have indicated to us that they've used up their retirement savings. 

INVESTOPEDIA: Why are beneficiaries losing their buying power, and what needs to happen to rectify the situation?

SHANNON BENTON: Part of it is that the cost of living adjustment is based on just one quarter in the previous year. So if seniors struggled through high inflation in March, April and May, as long as inflation dips in July, August and September, it's kind of a wash or a negative, even. So, that's a problem. 

The other problem is that the cost-of-living adjustment for Social Security beneficiaries is based on the Consumer Price Index for Urban Wage Earners, not on the experimental Consumer Price Index for the Elderly, which the Bureau of Labor and 𒉰Statistics has been tracking since th꧒e 1980s. If they used the Consumer Price Index for the Elderly, all but three years, the cost-of-living adjustment would be higher.

INVESTOPEDIA: What can Social Security beneficiaries do to cope with losing their buying power?

SHANNON BENTON: Social Security beneficiar🎐ies who are having trouble making ends meet, we suggest calling your local area agency on aging. They will be able to guide you in the right direction for assistance in your local area, be that food banks SNAP benefits, other tips, and resources that they know of.

Use those senior discounts when you can. A lot of grocery stores have selected mornings where seniors can go in and get a percentage off their groceries. Look at your farmer's markets, and your local food banks. Nobody should have to go hungry.

Some retirees are going back to work. But you know, that's kind of a catch-22 as well. If you make too much, then your benefits are cut. You kind of have to play a numbers game to determine if it's even going to be worth it for you.

Update, Oct. 10, 2024: This article has been updated to reflect the announcement by the Social Security Administration Thursday.