(NewsNation) — Inflation has eaten away at retirees’ budgets and a new study suggests annual Social Security bumps haven’t been enough to ease the pain.

Social Security benefits have lost 20% of their buying power since 2010, according to new research from The Senior Citizens League, a nonpartisan advocacy group representing older Americans.

Inflation and the impact on social security

To make up for that lost value, retired workers would need to be paid $4,440 more per year or $370 extra each month, the study found. In January, the average retired worker received $1,907 per month in Social Security benefits.

“Without an accurate and adequate adjustment that keeps pace with the rising costs of senior citizens, Social Security beneficiaries have cumulatively lost buying power,” said Shannon Benton, executive director of The Senior Citizens League.

Today the annual cost-of-living adjustment (COLA) is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). Benton thinks the COLA should be calculated using an inflation index specifically for seniors, called the CPI-E, which tracks the spending patterns of those 62 and older.

Under the CPI-E expenses like medical costs would be weighted more heavily, which would more accurately reflect seniors’ cost of living, Benton argued.

According to the report, Social Security benefits rose by 58% between 2010 and 2024, while the cost of goods and services purchased by the typical retiree rose much faster, by 73%, over the same period. 

That means for every $100 a retired household spent on groceries in 2010, they can only buy about $80 worth today. Retirees have felt the strain of high inflation in recent years, leading many to unretire and head back to work. The cost of housing has been an especially big pain point for seniors, per the report.

Each year Social Security benefits are adjusted to account for the rising cost of living but so far in the 2020s, only one COLA out of five has outpaced annual inflation, the study found. By comparison, in the 1990s and 2000s, 60% of COLAs beat inflation.

This year’s COLA was 3.2% and next year’s bump is currently projected to be even lower, 2.63%, according to The Senior Citizens League.

On one hand, a lower COLA is a positive sign that inflation is slowing but if prices accelerate outside the third quarter window when the COLA is calculated, the adjustment may lag behind the current pace of inflation.

Is changing the COLA calculation a good idea?

Emerson Sprick, an economist at the Bipartisan Policy Center, cautioned against reading too much into the report and called it “deeply misleading.”

He pointed out that annual COLAs don’t precisely match annual inflation because the Social Security Administration calculates next year’s COLA by comparing inflation in the third quarter from the previous year to the same period in the current year.

In other words, each COLA does reflect a full year of price increases, and thus, is a fair reflection of how the cost of living has changed from one year to the next.

“The method the (Social Security Administration) uses to calculate annual COLAs leaves absolutely no way for benefits to lose value,” Sprick said.

The only time COLAs don’t match inflation is when year-over-year price levels decline, which last happened in 2009. When that happens, beneficiaries gain purchasing power because COLAs can’t be negative, he said.

If the Social Security Administration were to switch to the CPI-E, as some legislation has called for, there are limitations.

For one, the CPI-E is based on a much smaller sample, which makes it less precise. In some cases, the CPI-E may actually lead to a lower COLA compared to the CPI-W. It’s also worth noting that millions of Social Security beneficiaries are under 62, meaning their spending habits wouldn’t be reflected in the CPI-E.

Still, a report from the Congressional Research Service found that switching to the CPI-E “is generally expected” to result in “higher COLAs and higher Social Security Benefits.”

If that’s the case, and the change was made, it could put additional strain on a program that is projected to be insolvent within a decade. Lawmakers would have to come up with another way to bolster the program’s funding.

Without reforms, millions of Social Security recipients will see their benefits slashed by 21% in just nine years.

A recent survey from the National Institute on Retirement Security found that 87% of Americans agree Social Security should remain a priority for the nation no matter the state of budget deficits.

“Social Security seems to be a fairly bipartisan issue,” Benton said. “Nobody wants to seem to fix it but everybody knows the demise is coming.”