Title: Evolution of Social Security Benefits: A Comparison from 1994 to Today
Millions of Americans rely on their Social Security checks to cover everyday expenses, and thankfully, this essential benefit includes a safeguard against inflation: the cost-of-living adjustment (COLA). This safeguard was introduced in 1975 to maintain the purchasing power of checks in the face of rising prices for goods and services.
Kick back to 1994, a time when video stores and floppy disks ruled the day. Inflation had substantially chipped away at purchasing power back then. While Social Security checks may appear larger today, their actual purchasing power tell a different tale.
Let's explore how much the average Social Security benefit has changed during the last 30 years:
Fast-forward to November 2024, and today’s average retired worker receives $1,925.46 in monthly benefits, amounting to around $23,100 annually. This marks an impressive 176% increase compared to the $697.34 average monthly benefit recorded in December 1994, equating to an annual income of $8,368.
What is the value of $697 now?
Although Social Security checks are larger now, inflation should still be taken into account. For instance, a $697 monthly payment in December 1994 would have roughly the same purchasing power as $1,469 in today's money, based on data from the Bureau of Labor Statistics' inflation calculator. However, this doesn't mean retirees are less affected by rising costs. In fact, 54% of retirees feel the 2025 2.5% COLA won't be enough to keep pace with inflation, as indicated by a recent survey conducted on our platform.
Given the leaky purchasing power of Social Security checks, it's prudent for future retirees to diversify their income sources. By planning ahead and exploring alternative income sources, you'll have greater flexibility to navigate retirement years.
In light of the inflation, a retiree living on a $1,469 monthly income derived from a $697 Social Security check in 1994 might find that amount sufficient to maintain their standard of living. Additionally, effective financial planning for retirement necessitates looking beyond reliance on Social Security for income, exploring alternatives to ensure financial flexibility and stability.
