Social Security keeps around 16 million seniors out of poverty each year, according to 2023 data from the nonpartisan Center on Budget and Policy Priorities, making it a crucial lifeline for many Americans.
However, the program isn’t as strong as it once was. Uncertainty surrounding potential benefit cuts could throw a wrench in some people’s plans, and there’s another hidden threat that could cost the average retiree more than $4,000 per year: the drastic loss of buying power.
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Social Security won’t go as far as it used to
Social Security is designed so that, in theory, it should keep up with rising costs over time. The annual cost-of-living adjustments (COLAs) aim to help benefits maintain their buying power, with retirees receiving yearly raises to help combat inflation.
But in the last couple of decades, those COLAs haven’t been enough. Social Security has lost around 20% of its buying power since 2010, according to a 2024 report from nonpartisan advocacy group The Senior Citizens League.
The report found that, at the time of publishing, the average retired worker received around $1,860 per month in benefits. But if benefits had maintained their buying power, that average should have been around $2,230 per month. That’s a difference of $370 per month, or $4,440 per year.
This loss of purchasing power appears to have been worsening in recent years, too. The report found that between 2010 and 2024, there have only been five years in which the COLA outpaced the inflation rate for that year. Between 2020 and 2024, just one COLA managed to beat inflation.
What will this mean for retirees going forward?
Social Security isn’t going as far as it used to even a decade ago, and if this trend continues, it may be more difficult or even impossible for the average retiree to survive on their benefits.
Even more concerning is the possibility of benefit cuts, which could be coming sooner than expected. According to the Social Security Board of Trustees’ 2025 report on the state of the program, the two trust funds are expected to run out by 2034 — one year sooner than estimated last year.
Also, once those funds are depleted, the program’s income sources are only expected to cover around 81% of scheduled benefits — which is also down from 83% last year. This means that by 2034, benefits could potentially be slashed by around 19%.
To be clear, this doesn’t mean that cuts are guaranteed to happen. Lawmakers could find a solution before 2034 to avoid cuts and potentially even help Social Security regain its lost buying power. However, until that plan is in place, it may be a good idea to develop a backup plan.
What you can do to prepare
If you’re not yet retired, increasing your savings even slightly can help reduce your dependence on Social Security. Investing $200 per month at an 8% average annual return can amount to close to $35,000 after a decade. For the average retiree, that’s equal to roughly 18 months’ worth of benefits.
Delaying claiming benefits is another option. The average retiree collects around $807 more per month at age 70 than at 62, according to 2024 data from the Social Security Administration. Even if you can only delay benefits by a year or two, that could boost your payments enough that potential cuts and loss of buying power won’t sting quite so much.
Social Security may be facing challenges, but that doesn’t mean it’s going away entirely. Even if the trust funds run out and benefits lose more buying power, retirees can still rely on their payments to some extent.
That said, by taking steps now to reduce your dependence on your benefits, you’ll be more prepared no matter what the future may hold.
