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The Gap Remains: Social Security Benefits Continue to Fall Short of Covering Basic Cost of Living for Older Americans, 2015-2020

by Jan E. Mutchler; Yang Li

Dec 17, 2020

Older Americans rely heavily on Social Security to support an independent lifestyle. Recent estimates suggest that among adults aged 65 years or older, more than half rely on Social Security for at least 50% of their family income, while nearly a quarter depend on Social Security for 90% or more of their family income.

Despite this substantial reliance on Social Security among older adults, Social Security benefits fall short of what is required to cover a basic cost of living across the United States, according to new estimates based on the Elder Index, a county-by-county measure of the income older adults need to secure an independent lifestyle. Nationally, the average Social Security benefit fulfills just 70% of basic living expenses of housing, food, transportation, and health care for a single renter in 2020, and 82% for an older couple.

Each September, a cost of living adjustment (COLA) is determined for Social Security benefits, based on the Consumer Price Index (CPI-W), and incorporated into the coming year's benefit adjustment. Typically, the COLA results in a modest increase in benefits, although benefit adjustments have been set at zero three times since 2009. The COLAs used for benefit adjustment do not account for expenses that disproportionately impact older adults, such as medical care, nor do they incorporate differences in costs of living across geographic locations.

In this report, the authors document spatial and temporal aspects of Social Security benefits' coverage of older Americans' cost of living by comparing average Social Security benefits to the Elder Index in 2015 and 2020. First, they briefly introduce the Elder Index and how it is calculated to measure cost of living specific to older adults. Second, they document the extent to which average Social Security benefits cover cost of living for older adults at the national and county levels in 2020. Third, they compare patterns of coverage between 2015 and 2020, identifying states where Social Security benefits' coverage of the Elder Index has increased, stayed flat, or decreased over time. The report concludes by discussing policy implications.

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