Inflation has been no joke this year, with consumer prices jumping to some of the highest levels in 40 years. Consumers have felt the sting everywhere, whether they are at the pump or the grocery store.
For Social Security retirees, there may be some good news to come from this when the Social Security Administration announces what could be the largest cost of living adjustment (COLA) to benefits in decades. As things stand, monthly checks could rise by 8% or 9% in 2023.
Of course, this is to cover higher prices and to ensure retirees don't lose purchasing power. We can see what retirees and seniors age 62 and over have been spending the most money on by examining recent data from the Consumer Price Index for Americans 62 years of age and older (CPI-E), which focuses on items that older Americans are more likely to spend their income on. Here are three goods and services that Social Security retirees have been paying hand over fist for.
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1. Transportation
According to the CPI-E, between August of last year and August of 2022, which is the most recent month for which data is available, elderly Americans saw the cost of transportation rise by more than 13%. This probably isn't a huge shock considering that the prices of gasoline and energy are up so much. Despite falling in recent months, gas prices are still much higher than in previous years.
As many Americans get older, they may not be able to drive themselves, but they still need to go places. And with the price of everything from gas to labor to vehicles way up this year, senior transportation has become more expensive.
2. Food and beverages
Increases in food and beverage prices trailed increases in transportation costs but were still about 11% in August year over year.
As the Consumer Price Index for All Urban Consumers (CPI-U) has shown, not only has the cost of food away from home, like fast food, been growing, but grocery prices have been on the rise as well. In fact, aside from August, grocery prices have been growing at a faster clip than food away from home this year.
Data from a 2020 report conducted by the organization Feeding America estimated that just shy of 7% of seniors were food insecure, which means they can't consistently get enough food.
However, recent estimates in another study published in Applied Economic Perspectives and Policy estimate that a 10% increase in Social Security benefits could eliminate food insecurity for roughly half a million senior citizens, although the study may not have been factoring in current levels of inflation.
3. Housing
Housing prices in August were up about 7.7% year over year, according to the CPI-E. This is also not a surprise with the cost of housing taking off during the ultra-low-rate environment in 2020 and 2021. Even now, despite higher rates, housing prices in the CPI-E in August were the highest they've been all year.
The insurance firm Genworth Financial found that the national median cost of assisted living in the U.S. was $4,500 per month in 2021 or $54,000 per year.
Things have likely only gotten worse this year, and considering the maximum Social Security check is below $4,500 per month, assisted living is likely very difficult for a lot of seniors to afford. We also know that rent has stayed stubbornly high in the CPI-U this year, another difficulty.
