"Social Security benefits are supposed to be one of the most stable income sources that retirees have. Since you contribute to Social Security throughout your working life, you earn benefits that are equal to a percentage of your average wage. Your benefits replace around 40% of pre-retirement earnings, and the money is guaranteed to keep coming to you as long as you are alive."
"The good news is, you don't have to worry about saving, investing, or choosing a safe withdrawal rate to get these Social Security benefits and make them last. Unfortunately, though, there is some bad news too. The value of these benefits is declining, the decline is likely to continue, and it could cause serious ongoing financial struggles for those who are relying on Social Security as a main source of their retirement funds."
"Social Security's buying power has actually declined by a much more substantial amount than you might think, especially given that Cost of Living Adjustments (COLAs) are built into the program and designed to stop buying power from being reduced. The Senior Citizens League reported recently on just how far the value of benefits has fallen, indicating that in 2024, the average monthly Social Security payment was only worth $0.80 on the dollar relative to the value of benefits in 2010."
Social Security provides lifetime income replacing around 40% of pre-retirement earnings based on contributions and average wage. Benefits include Cost of Living Adjustments (COLAs) intended to preserve purchasing power. Despite COLAs, buying power has declined substantially, with the average monthly payment in 2024 worth about $0.80 relative to 2010, a roughly 20% reduction. Restoring 2010 buying power would require an average increase of about $4,442 per year. A modest 2.8% raise in 2026 will not fully offset the loss, leaving retirees who depend primarily on Social Security at risk of ongoing financial shortfalls.
Read at 24/7 Wall St.
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