A Hidden 13.7% Social Security Cut Is Hurting Seniors Every Month

Not understanding the truth about Social Security is one of the biggest financial mistakes retirees make. Unfortunately, one of the major things many seniors don't realize is that they have been essentially subject to a de facto benefits cut.

This benefits cut is leaving many retirees struggling to cover basic costs, as it has resulted in a major reduction in the buying power of benefits. Here's what seniors need to know about why the benefits reduction is happening and what it means for them.

Social Security benefits have lost 13.7% of their buying power

The Senior Citizens League recently sounded the alarm over the losses retirees were experiencing. According to the senior advocacy group, Social Security benefits have lost an estimated 13.7% of their buying power since 2016.

This means that retirees have effectively lost 13.7% of their buying power. Since benefits can buy so much less than they used to, this is essentially a hidden benefit cut. Seniors don't really realize that it's happening because they lose a little bit of buying power each year, and there's no major legislative change that makes that happen.

Instead, the value of their benefits simply quietly erodes, leaving many struggling to afford the things they could buy a decade ago.

Why Social Security benefits are losing buying power

This hidden benefit cut is occurring for a simple reason. Social Security is not keeping pace with inflation. This likely comes as a surprise to seniors because benefits are supposed to be protected against losing buying power by Cost of Living Adjustments (COLAs).

COLAs are periodic raises that occur during most years. If the third-quarter data from the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) shows that the price of a basket of goods and services has increased year-over-year, retirees get a cost-of-living adjustment based on that increase.

Unfortunately, the Senior Citizens League reports that CPI-W isn't an accurate measure of the real inflation retirees experience because the basket of goods and services measured is different from the things retirees actually buy.

Since the things retirees spend money on tend to increase in price faster than the overall inflation rate, retirees lose ground due to this flaw in the COLA formula.

How the loss of buying power affects retirees

The 13.7% benefits cut may have been hidden in the sense that it wasn't announced, but retirees are feeling the effects, and most know that their COLA isn't enough, even though not everyone necessarily knows why.

In fact, the Senior Citizens League data reveals that 79% of seniors believe inflation "substantially outpaced" the cost-of-living adjustment retirees received in 2024.

The group's 2026 survey also estimated that 44% of retirement-age Americans depend on Social Security for all their income, leaving those seniors especially vulnerable when benefits lose buying power.

Could lawmakers change the COLA formula?

There are proposed fixes to address this issue. Specifically, there is an experimental price index called the Consumer Price Index for the Elderly. Raises could be tied to that instead of to CPI-W. Some advocates have proposed calculating COLAs with the experimental Consumer Price Index for the Elderly, or CPI-E, instead of the CPI-W. That change could produce larger adjustments in some years, but Congress has not adopted it.

Larger COLAs could also increase Social Security's costs at a time when the program already faces a long-term funding shortfall. The 2026 Social Security Trustees Report projects that the Old-Age and Survivors Insurance Trust Fund, which pays retirement and survivor benefits, could deplete its reserves in the fourth quarter of 2032. At that point, ongoing income would be sufficient to pay an estimated 78% of scheduled benefits unless lawmakers act.

Lawmakers are unlikely to do something to worsen Social Security's finances at a time when they are looking for solutions to shore up the program.

How retirees can prepare

Retirees need to be aware of the fact that benefits are losing ground and adjust their spending accordingly. This may mean making changes to the things they buy or living on a tighter budget when inflation causes increases in the cost of things they rely on, like medical care, energy, transportation, and housing.

Retirees should try techniques like clipping coupons to reduce grocery bills, walking or biking instead of driving, adjusting their thermostat to use slightly less heat or air conditioning, and eating more meals at home instead of dining out.

Bottom line

Social Security benefits have lost buying power over the past decade, and there is no guarantee lawmakers will change the COLA formula soon.

The best thing for current workers to do is to adjust their retirement plan to ensure that they are saving and investing enough to live comfortably even if their Social Security benefits don't buy as much in the future.

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