If you took a $1 bill today, buried it in a time capsule, and uncovered it 30 years later, you'd find that it's worth a lot less than its current value. We can thank inflation for that.

Inflation causes the cost of living to rise over time, and it's the reason why annual Social Security cost-of-living adjustments, or COLAs, were implemented decades ago. Seniors on Social Security start out collecting a monthly benefit based on their wage history. But that benefit needs to go up somehow to help ensure that they're are able to keep pace with inflation.

Now COLAs are by no means predetermined -- meaning, there's no preset percentage by which benefits go up from year to year. Rather, COLAs are calculated on an annual basis based on fluctuations in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). When the cost of common goods and services increases, COLAs do the same.

Pile of Social Security cards


The problem, however, stems from the fact that while there's a framework in place that allows for COLAs, seniors aren't actually guaranteed an increase every year. If the CPI-W holds steady, Social Security benefits can follow suit. And even when benefits do go up, that raise is often far from generous. In fact, seniors on Social Security are said to have lost an estimated 33% of their buying power since 2000, and insufficient COLAs are to blame. Therefore, while Social Security is technically designed to keep up with inflation, it's certainly failed to do so over the past 20 years.

Take financial matters into your own hands

If you're a senior on Social Security who's been struggling financially due to stingy COLAs, the solution isn't to sit back, cross your fingers, and hope that future raises are more generous. Rather, you should take steps to lower your spending and increase your monthly income.

For the former, map out a retirement budget that works given the income you're limited to. You may need to cut back on certain non-essential expenses, like leisure, or downsize to a smaller home to stay afloat financially.

As far as increasing your income goes, the solution is pretty simple: Work in some capacity. That could mean taking a few shifts per week at a local retailer, consulting in your former professional field, or joining the gig economy and finding a job you can do at your own pace and on your own schedule.

Meanwhile, if you're not yet retired, let this serve as a wakeup call that Social Security most likely won't suffice in buying you a comfortable retirement lifestyle, especially since COLAs have a tendency to fail seniors. Instead, make an effort to save aggressively during your working years. Max out your IRA or 401(k) annually, or get as close as possible. And if you have an employer plan, make sure to contribute enough of your own money to it to snag the full company-sponsored match you're entitled to.

Social Security COLAs are designed to protect seniors from losing buying power, but in recent years, they've failed. Set yourself up to rely on them less heavily, and you'll avoid a lot of the financial stress so many seniors today face.