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Many of us have read that our Social Security retirement checks can be expected to shrink by 23% beginning in 2034. But what about the creeping effects of inflation on Social Security? And the rising costs of housing and medical expenses for retirees?

The longer we live after taking Social Security, the less its actual buying power. Social Security cost of living adjustments just don’t keep pace with the actual increase in the cost of living, particularly for seniors.

Decrease of Buying Power of Social Security Retirement Benefits

From January 2017 to January 2018 alone, the buying power of Social Security retirement benefits decreased 4%.

Since 2000, the buying power has fallen by more than 1/3rd.1

People with 401(k)s can counteract the one time 23% shrinkage by converting up to 20% of their 401(k), to a maximum of $125,000, to a Qualified Lifetime Annuity Contract, or QLAC.

But QLACs, just like Social Security retirement benefits, will not keep pace with inflation, with the rising cost of housing. Neither will it keep pace with the rising cost of medical care and our increasing need for it as we live for decades with chronic conditions and need more and more help to fend off death and provide for our care in our final years.

Delaying Social Security Benefits

All this points to the benefits of delaying taking Social Security retirements benefits, of working in “retirement” and of making arrangements to retire on more than Social Security (or any other annuity) after the first decade of retirement. For every year beyond full retirement age (66 to 67 depending on birth year), Social Security retirement benefits increase by about 8%. People who continue to work can continue to add to the 35 highest paid years on which Social Security retirement benefits are based. Roth IRAs and Roth 401(k)s, etc. need not be tapped beginning at 70 ½. Downsizing can lower monthly expenses, free up money to invest and time to enjoy retirement.

1 Senior Citizens League June 2018 report


Special needs planning attorney, Terry Garrett, is a member of the National Academy of Elder Law Attorneys and is active in the Texas and Austin Bar Associations. She graduated with honors from Cornell University. She was on the Dean’s List at Wharton Business School. She earned her J.D. at Columbia Law School, receiving the Parker Award and a Mellon Fellowship.

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