Is Inflation Quietly Shrinking Baby Boomers' Social Security Checks?

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There’s a reason lawmakers decided decades ago that Social Security’s annual cost-of-living adjustments, or COLAs, should be automatic. Without yearly boosts to keep up with inflation, seniors on Social Security are virtually guaranteed to lose buying power over time.

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. For someone with a nest egg of that size, Social Security could still be covering the majority of their bills. And if it weren’t for the program’s COLAs, a lot of seniors would be struggling immensely.

That said, Social Security’s COLAs may not be doing as good a job of fighting inflation as some people might think. The unfortunate reality is that baby boomers on Social Security have been losing buying power through the years because their COLAs have fallen short. And the problem is likely to continue unless lawmakers implement a big change.

Social Security recipients have been losing buying power

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. When there’s no increase in inflation, or a decrease (which can certainly happen), benefits stay the same.

Social Security benefits have gotten a COLA almost every year since lawmakers voted to make those raises automatic. In spite of this, the nonpartisan Senior Citizens League reported last year that Social Security recipients had lost out on 20% of their buying power since 2010 due to insufficient COLAs.

Furthermore, many advocates feel that the problem is the way those COLAs are measured. The CPI-W is not a great representation of the costs Social Security recipients face, since many are not wage earners and many do not reside in urban areas.

Advocates have pushed to change the way Social Security COLAs are calculated to an index that measures expenses that are more specific to retirees. So far, though, no changes have been made to that effect.

Baby boomers on Social Security could continue to be disappointed by COLAs

Social Security’s COLAs are not supposed to help recipients gain buying power. They’re merely supposed to help ensure that they don’t lose out on buying power. But if lawmakers don’t make a change to the way they’re calculated, baby boomers who collect benefits could be in for many more years of insufficient raises and financial struggles.

In fact, at this point, a lot of older Americans are eagerly awaiting news of a 2026 COLA. So far, though, estimates are pointing to a 2.6% boost, which may not be enough to help seniors keep up with their expenses given how persistent inflation has been.

Baby boomers who are struggling to keep up with their costs should look at income streams outside of Social Security, such as part-time work or the gig economy. It’s a better idea than sitting around waiting for lawmakers to implement changes that lead to more effective COLAs.

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