Social Security benefits receive annual cost-of-living adjustments (COLAs) tied to inflation, intended to help recipients maintain their purchasing power. However, historical data reveals that these adjustments often fall short of actual inflation rates, leaving seniors financially strained. The current system bases COLAs on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which does not accurately reflect the specific expenses of retirees. Therefore, having additional retirement income outside of Social Security is essential for maintaining financial stability in an inflationary environment.
Social Security cost-of-living adjustments (COLAs), tied to inflation, have historically failed to adequately compensate retirees, leading to a loss of buying power.
While automatic COLAs are meant to help maintain purchasing power for Social Security recipients, they often fall short, leaving many retirees financially vulnerable.
The CPI-W, used to determine Social Security COLAs, does not accurately represent the rising costs faced by seniors, causing a gap in necessary adjustments.
Retirees are encouraged to diversify their income sources beyond Social Security to better protect their purchasing power against inflation-driven cost increases.
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