Inflation and Social Security: How Well Are They Protected?

It's important to remember that the monthly Social Security benefit you begin collecting is not necessarily 

the same benefit you'll receive for the rest of your life. COLAs, or cost-of-living adjustments, 

are made to benefits every year. Colas help seniors on Social Security maintain their 

purchasing power as inflation drives up living costs. The cost of living tends to rise naturally over time. 

Seniors would be at a huge disadvantage if Social Security benefits remained the same forever. 

However, since some seniors collect Social Security for 30 years or more, it's only fair to

boost them in line with rising living costs. In reality, Social Security often falls 

short of protecting seniors from inflation. That's why retiring on those benefits alone is a bad idea.

A major shortcoming

Inflation is a major concern for both workers and retirees these days. According to the Consumer Price Index, 

which measures changes in the cost of consumer goods, prices rose 9.1% last year. 

That's a much higher reading than usual. Even during periods of moderate inflation,

living costs still tend to rise, which is why Social Security COLAs were implemented. 

Those COLAs, however, often fail to match inflation because they're based on limited data.

The Social Security Administration announces the following year's COLA in October  after aggregating third-quarter inflation data.

Then, seniors get one raise for the upcoming year - a raise that does not take inflation into account.

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