financial planning

Some are worried about the state of Social Security since the latest report found that starting next year, the program’s annual cost will exceed its income. Some speculate that since the program’s trust fund is expected to be depleted by 2034, cuts are inevitable. But, there should be a more immediate worry facing beneficiaries than a theoretical future policy change: Social Security’s decreased buying power.

There are several reasons why you can’t rely solely on Social Security in retirement, and the fact that benefits have lost 33% of their buying power since 2000 is one of them. And, they will continue to lose buying power as long as the Cost of Living Adjustments (COLA) are below the inflation rate. Inflation rates have been around 2% which is relatively low, but still enough to eat away at retirees’ savings and value of a Social Security check: If you retire at age 65 and the inflation rate stays at 2% per year, $75,000 will have the same buying power as $50,000 when you are 85.

To make matters worse, the costs of some services that retirees spend more money on than the average American are rising faster than the overall inflation rate, such as healthcare, housing, and food. Since 2000, prescription drug prices have risen 352%, Medicare Part B premiums have risen almost 200%, along with home owners’ insurance and real estate taxes. The Senior Citizens League projects the cost-of-living adjustment for 2020 to be 1.7%. Since 2000, retirees’ expenses have increased twice as fast as the annual COLA adjustment to Social Security.

There are reasons why you should be worried about inflation, especially in retirement. This could especially be a problem if higher tariffs on Chinese goods raises the inflation rate in the third quarter, after the COLA adjustment is decided for the year. Inflation can erode the buying power of your Social Security benefit, as well as your personal savings.

There’s no telling what the inflation rate could be 15 years from now when you’re already retired and relying on Social Security and your savings – in the 1970’s the inflation rate was over 7%. And there’s no guarantee that COLA adjustments would keep up with an increased inflation rate.

If you need a plan to combat inflation and Social Security’s decreased buying power, contact the professionals at SHP Financial. They can help you create a plan for a long retirement. Click here to schedule your no cost, no obligation financial review today.


The content presented is for informational purposes only and is not intended as offering financial, tax, or legal advice, and should not be considered a solicitation for the purchase or sale of any security. Some of the informational content presented was prepared and provided by tMedia, LLC, while other content presented may be from outside sources believed to be providing accurate information. Regardless of source no representations or warranties as to the completeness or accuracy of any information presented is implied. tMedia, LLC is not affiliated with the Advisor, Advisor’s RIA, Broker-Dealer, or any state or SEC registered investment advisory firm. Before making any decisions you should consult a tax or legal professional to discuss your personal situation.Investment Advisory Services are offered through SHP Wealth Management LLC., an SEC registered investment advisor. Insurance sales are offered through SHP Financial, LLC. These are separate entities, Matthew Chapman Peck, CFP®, CIMA®, Derek Louis Gregoire, and Keith Winslow Ellis Jr. are independent licensed insurance agents, and Owners/Partners of an insurance agency, SHP Financial, LLC.. In addition, other supervised persons of SHP Wealth Management, LLC. are independent licensed insurance agents of SHP Financial, LLC. No statements made shall constitute tax, legal or accounting advice. You should consult your own legal or tax professional before investing. Both SHP Wealth Management, LLC. and SHP Financial, LLC. will offer clients advice and/or products from each entity. No client is under any obligation to purchase any insurance product.
Was this information helpful? Should we publish more like this?
YesNo