If you feel like your grocery bills keep climbing, you’re right. They are indeed increasing. While food prices at home didn’t change from August to September, the Bureau of Labor Statistics reported that grocery costs were up 1.8% compared to the same time last year.
This isn’t a disaster, though. In fact, it’s lower than the long-term average. But there’s a bit more context. Prices rose by 2.1% year-over-year in August and were 2.6% higher in July. So, we’ve seen a period where those increases are finally slowing down a bit after the steep climbs of last year. To put it in perspective, consumers are now spending about 22% more on groceries than they were five years ago.
On a brighter note, there’s some relatively good news here.
Higher food costs are more than covered, but…
The yearly cost-of-living adjustment (COLA) that the Social Security Administration applies to benefits each January takes into account several everyday expenses, such as food, housing, transportation, and healthcare.
However, it’s not just a simple average of all these costs. Since housing is generally the largest expense for most households, its price changes have the biggest effect on the inflation rate used for that year’s COLA. On the other hand, entertainment expenses have less weight in determining inflation, meaning they don’t really move the needle much in the calculations.
So, for retirees relying on Social Security benefits, there’s some silver lining. Although food prices are leveling off, increases in other areas like gas and utility bills led to a substantial COLA for the upcoming year. Recently, the Social Security Administration revealed that benefits will rise by 3.6% next year, which translates to about a $75 increase monthly for the average recipient.
No net “win,” and even a possibility of added financial stress
Even though seniors seem to be gaining a little ground with the new COLA in relation to food prices, they still face rising costs in transportation and housing. Furthermore, last year’s skyrocketing grocery prices had already put them at a disadvantage, as the COLA didn’t fully cover those increases, nor did any subsequent adjustments. So, it’s a bit of a wash when all is said and done.
It’s also important to remember that no one receives their COLA until after the increases happen. While the Social Security Administration tries to ease the burden of living expenses, beneficiaries have already been coping with these rising costs for possibly up to a year. If seniors weren’t ready for this extra financial pressure, they might find themselves in a tougher spot than they were a year ago, especially if they had to borrow money at today’s higher interest rates. In that case, the forthcoming COLA might feel a bit insufficient, and a little late.
