Quite a bit has modified over the previous 20 years. In 2005, the iPhone did not exist, YouTube was simply beginning, and folks listened to music on CDs as a substitute of an app on their smartphones.
Throughout that point, Social Safety retirement advantages have additionally skilled a change. In 2005, the typical month-to-month Social Safety profit was $1,002, or simply over $12,000 yearly. To begin this yr, the typical month-to-month profit for a retired employee was $1,975.
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Why have month-to-month advantages elevated a lot previously 20 years?
It is not laborious to inform simply how a lot costs for a lot of gadgets have elevated over the previous twenty years. Hire has skyrocketed, groceries price considerably extra, and healthcare is turning into one of many largest bills individuals (particularly retirees) face.
Now, think about if the typical month-to-month Social Safety profit had been nonetheless round $1,000. It could be powerful to suppose somebody may cowl fundamental bills, not to mention dwell comfortably in retirement.
That is why Social Safety has an annual cost-of-living adjustment (COLA) that is meant to assist retirees take care of inflation. The COLA would not all the time sustain completely with rising costs, but it surely’s one thing nonetheless.
How does Social Safety resolve how a lot to extend advantages?
Social Safety makes use of the Shopper Value Index for City Wage Earners and Clerical Employees (CPI-W) to find out how a lot to extend month-to-month advantages.
It compares CPI-W knowledge from the present yr’s third quarter to the earlier yr’s knowledge and adjusts month-to-month advantages accordingly. If the CPI-W elevated by 3%, advantages enhance by 3%; if the CPI-W elevated by 5%, advantages enhance by 5%; and so forth.
Some have argued that the CPI-W is not an ideal benchmark for measuring retiree spending and subsequently that Social Safety advantages have misplaced a few of their buying energy in relation to what older Individuals sometimes want to purchase. Nonetheless, there was no indication that any different benchmark will ever exchange the CPI-W.
