Do Social Security COLAs Really Keep Up With Inflation?

Other observers believe that CPI-W is good enough because seniors, and all consumers, make substitutions. If beef prices rise sharply, seniors might switch to chicken. Further, their spending habits might protect them from inflation.

"We actually see the opposite. We find that inflation doesn't impact retirees as much as it impacts younger families," says Dana Anspath, founder and CEO of Sensible Money in Scottsdale, Arizona and author of "Social Security Sense: A Guide to Claiming Benefits for Those Age 60-70."

Over the past year, some of the biggest increases have been in housing, with existing home sales rising 19.1% since May 2020, according to the National Association of Realtors.

"For most retirees, housing costs tend to be fixed because they either own their home outright or they've got a mortgage with fixed monthly payments," says Anspath. Retirees who may be looking to downsize might actually benefit from these higher asset prices since they'll be selling into a hot market.

Still others say the inflation index is a wash.

"I don't think it really matters," says Elaine Floyd, author of "Savvy Social Security Planning for Boomers" and director of retirement and life planning at Horsesmouth. "[The 2022 COLA] is a gift and will make up for lost ground from last year."

Workplace Savings and Social Security

Rather than focusing on the COLA adjustment each year, workers would be better served maximizing their retirement savings. As it is, Social Security only provides about 40% of the income the average retiree needs.

"Social Security was never meant to be the sole source of income for people," says Nancy Hecht, a certified financial planner with Certified Financial Group in Altamonte Springs, Florida. "You still need to save as much as possible and that's going to get you to a comfortable retirement."

To make defined contribution plans more effective, the Secure Act now makes plan administrators translate a participant's balance into projected monthly income. Younger workers might not find that especially useful, but those nearing retirement can better understand what their quality of life might look like in retirement.

"People have no clue how much their retirement savings will mean as retirement income," says Floyd. "If you take that lump sum and translate it into a monthly amount, people would be astounded at what kind of income they would have."