Social Security COLAs Don't Cut It. Here's How An Annuity Can Fill That Gap

"The unfortunate reality is that while Social Security benefits are supposed to help ensure that retirees maintain their full buying power during the whole of their retirement, this is not working in practice. Seniors are falling behind despite the fact that Cost of Living Adjustments (COLAs) happen automatically, and that's because a flaw in the COLA formula means that annual raises for retirees don't go far enough during most years."

"COLAs are built into Social Security because seniors typically rely on their retirement benefits as an income source for decades. Prices, of course, go up over time - which is why penny candy no longer costs a penny and everything costs more than it did a few years ago. If Social Security benefits didn't increase regularly, retirees would face serious hardship as their buying power would erode every year, despite their benefit amount staying the same on paper."

"Unfortunately, the COLAs that are happening are falling short of the inflation that retirees are actually experiencing. That's happening because of a problem with the benefits formula. Under the current formula, the COLA is set each year based on third-quarter data that looks at year-over-year price changes. Retirees get a COLA that's equal to the percentage increase in total prices in the basket of goods and services included in a consumer price index."

Social Security Cost of Living Adjustments (COLAs) are intended to preserve retirees' buying power but frequently fail to match the inflation retirees experience. Many retirees rely heavily on Social Security for decades, so inadequate COLAs erode purchasing power as prices rise over time. The COLA calculation uses third-quarter year‑over‑year percentage changes in a consumer price index basket of goods and services, a formula that often produces raises too small to cover actual cost increases. Annuities can provide supplemental, predictable income to help close the gap and support a more secure retirement.

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