The Value of Social Security Benefits Is Declining. Here’s How to Supplement With More Guaranteed Income

Social Security benefits are supposed to be one of the most stable income sources retirees have. Because you contribute to Social Security throughout your working life, you earn benefits equal to a percentage of your average wage. Those benefits replace roughly 40% of pre-retirement earnings, and the money is guaranteed to keep coming as long as you are alive.

The good news is that you don’t have to worry about saving, investing, or picking a safe withdrawal rate to receive these benefits. The bad news is that the real value of those benefits has been eroding for years, and the decline is likely to continue. For retirees who depend on Social Security as a primary income source, that shrinkage poses a serious and growing financial threat.

With buying power falling, finding ways to supplement Social Security with additional guaranteed income is becoming essential. There is a practical option worth considering if you are worried about relying on a benefit that is slowly losing ground to inflation.

Why the buying power of Social Security benefits keeps falling

Social Security’s buying power has declined by a more substantial amount than most people realize, particularly given that Cost of Living Adjustments (COLAs) are built into the program and specifically designed to prevent that kind of erosion. The Senior Citizens League (TSCL), a nonpartisan advocacy group for older Americans, has tracked this problem for years. Its most recent research, the 2026 Loss of Buying Power study, found that Social Security benefits have lost 13.7% of their purchasing power since 2016. In practical terms, today’s average benefit is worth only about 86 cents on the dollar compared to what that same benefit could buy a decade ago. To restore the buying power retirees had in 2016, benefits would need to rise by $295.85 per month for the average recipient.

The 2026 COLA landed at 2.8%, confirming the raise retirees received in January. But that increase has already been outpaced by real-world inflation for most of the year. Looking ahead, forecasters currently project the 2027 COLA at around 3.5% to 3.6%, according to estimates from TSCL and AARP. While that would be the largest annual boost since 2023, it still would not come close to recovering the cumulative buying power lost over the past decade.

Adding to that pressure, the 2026 Social Security Trustees Report now projects the OASI retirement trust fund will deplete in late 2032, one quarter earlier than last year’s estimate. If Congress does not act by then, ongoing payroll tax revenues would cover roughly 78% of scheduled retirement benefits. The combined OASDI trust funds, which include disability insurance, are projected to last until 2034.

The root cause of the buying power problem is a structural flaw in how COLAs are calculated. The annual adjustment is tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which tracks spending patterns of people who are still in the workforce, not retirees. The CPI-W does not weight healthcare or housing as heavily as it should for a population that spends a disproportionately large share of income on both.

That mismatch matters because healthcare costs consistently rise faster than broad inflation, and housing costs have surged sharply over the past decade. An alternative measure, the Consumer Price Index for the Elderly (CPI-E), is specifically designed to reflect seniors’ spending. Research from TSCL shows the CPI-E regularly measures senior inflation roughly 0.2 percentage points higher per year than the CPI-W. Advocacy groups have pushed Congress to adopt the CPI-E as the basis for COLA calculations, but no such change has been enacted. Until the formula changes, benefits will continue to lose ground year after year.

How to supplement Social Security with another guaranteed income source

If you need more guaranteed income and do not have a traditional pension from your employer, an annuity is one of the primary tools available to fill that gap. A lifetime income annuity converts a lump-sum premium into a stream of payments that continues for as long as you live. Some contracts also include cost-of-living adjustment riders that increase payments annually, which can help offset the same inflation pressures eroding Social Security. Multi-Year Guaranteed Annuities (MYGAs) are also competitive right now, with five-year rates reaching around 6.30% as of mid-2026, according to annuity rate trackers.

When evaluating any annuity, the key variables are the premium required, annual fees, surrender charges if you need to exit early, and the actual income produced. One often-overlooked factor is liquidity: once you annuitize, you generally cannot access the underlying principal. That trade-off is worth understanding before committing. Insurer financial strength also matters because your payments are only as secure as the company backing them. Look for carriers with at least an A-minus rating from major rating agencies. Shopping across several highly rated insurers and comparing payout rates side by side, rather than defaulting to the first quote you receive, is the most reliable way to find a contract that fits your situation.

The core appeal of a lifetime annuity is straightforward: it gives you a baseline income floor that does not depend on market performance and does not run out. For retirees who are already watching Social Security’s real value shrink each year, locking in a second guaranteed income stream sooner rather than later can provide meaningful financial stability.

Editor’s note: This article has been updated to reflect TSCL’s 2026 Loss of Buying Power study, which now places Social Security’s buying power decline at 13.7% since 2016 (approximately 86 cents on the dollar) rather than the earlier 2024 report figure of 20% since 2010, and to incorporate the 2026 SSA Trustees Report projection that the OASI retirement trust fund could deplete as early as late 2032.

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