As Social Security’s buying power diminishes, many retirees are left struggling financially. A significant factor contributing to this situation is the rapid increase in inflation that’s outpacing the growth of Social Security benefits. According to The Senior Citizens League (TSCL), the average Social Security payment in 2024 is worth about 80 cents on the dollar compared to 2010. This means that those receiving Social Security checks have experienced a loss of approximately 20% in their purchasing power.
Individuals who are on the path to retirement are taking note of this inadequate government program’s ability to provide for them in the future, and so they’re revamping their financial strategies by adding lucrative real estate investments into the mix.
Related Article: 2025 Social Security Increase Likely to Fall Short as Real Estate Investors Foresee Financial Gains
Insufficient COLAs and Inflation Pushing Social Security’s Buying Power Down
The cost-of-living adjustment (COLA) for Social Security in 2024 was set at 3.2%, much lower than the increases of 8.7% and 5.9% seen in 2023 and 2022. Despite these adjustments, the Senior Citizens League points out that COLA increases have not kept up with the inflation Social Security recipients are dealing with. This negatively impacts the quality of life for the millions of Americans relying on these benefits, making it difficult to support themselves.
Over the past 15 years, inflation has surpassed cost-of-living adjustments on eight occasions, revealing a large gap between these two economic factors since 2010, as seen in the chart below:
The situation could potentially get worse because beneficiaries are expected to receive a 2.63% cost-of-living adjustment in 2025, which falls behind the current inflation rate of 3%. If these numbers turn out to be correct, this would represent the smallest annual COLA since 2021. The Social Security Administration will be announcing the final COLA figure in mid-October.
The Future of Government Retirement Funding Looks Grim
In only nine years, the oldest members of Generation X will turn 67, the age at which they can start receiving Social Security benefits. However, they may be in for a shock when they discover that the Social Security trust fund is depleted. This means that the program can only pay out benefits based on the money collected from current workers’ paychecks. According to the Social Security trustees’ 2024 report, if Congress doesn’t step in, benefits could be reduced by 21% for everyone, including retirees, starting in 2033.
Americans Don’t Have to Rely on Dismal Social Security Benefits
It’s evident that even individuals who are not retired and have full-time jobs are struggling to put food on the table due to high inflation. So, imagine relying on poverty-level social security benefits, possibly coupled with 401(k) funds that will run out at some point during your retirement years. Plus, the media has been reporting that the stock market will drop by 32% next year due to the Fed’s failure to save the economy from a recession – are you willing to bank on losing that much money in your 401(k) knowing Social Security payments won’t have your back?
Related Article: Lubbock Recognized as Recession-Proof City and Maintained a Strong Rental Market Throughout Pandemic
In reality, the percentage of people relying solely on Social Security benefits is 48% for married couples and 69% for unmarried individuals. These numbers seem to reflect people who didn’t prepare financially and are most likely just making ends meet.
Those who have been doing their research know that they can prepare for a future that doesn’t include financial disparity due to Social Security’s buying power hitting all-time lows. These are the people who are getting set up to retire as planned or even early, as opposed to continuing to work into their golden years just to make ends meet. These are the individuals who are getting in the driver’s seat of their financial situation by investing in income-producing assets such as rental real estate through a self-directed IRA.
Related Article: Retiring on Rental Income vs Social Security – A Financial Comparison
Get Setup with Income-Generating Properties That’ll Provide Financial Security Throughout Your Retirement Years
If you switch gears now and head down a path that creates a financial safety net for your retirement years, then you won’t have to worry about Social Security’s buying power declining. This can be accomplished by saving for your retirement with rental properties that sit within a self directed IRA. It’s a strategy that’s capable of reeling in monthly rent checks like clockwork, where the money is poured into your retirement account. You can learn more about SDIRAs through our article, which covers the topic in detail – Why Switching from a Traditional to an SDIRA is a Wise Strategy for Growing Your Retirement Funds. Also, if you’re not familiar with self directed accounts, you can schedule a complimentary call with Directed IRA; they can certainly answer all your questions.
The bottom line is that Social Security benefits are not keeping up with inflation, the economy is volatile, and those with a 401(k) retirement plan know all too well that if another pandemic hits, they could lose a substantial chunk of their savings. Rental real estate is not subjected to any of this; it’s a stand-alone, solid investment that’s not connected to Wall Street, doesn’t falter with the ups and downs of the economy, and it’s a great hedge against inflation. On top of this, it’s one of the most secure wealth-building assets to invest in, which can be handed down from generation to generation, creating legacy wealth.
If you’d like to kick-start your investment journey, browse through the following pages for information on empowering yourself financially through rental real estate:
- The Financial Freedom Academy
- Freedom Number Cheat Sheet
- 90-Day Financial Empowerment Bootcamp
- Morris Invest & SDIRA Program Overview
Let Morris Invest Help You Move Away from Relying on Insufficient Social Security Benefits
Morris Invest is a full-service real estate investment company that offers new construction rental properties. Along with this, we place a property manager and tenant for our clients, setting them up for immediate cash flow. Be sure to schedule a free 30-minute call with Morris Invest if you’d like to get on the path to investing in rental properties that can create a substantial nest egg.
You’ll also want to dive into the following video featuring Clayton Morris and Mat Sorensen, which discusses building retirement wealth outside of Wall Street.
