I received the following press release from the Senior Citizens League a few weeks ago. It highlights a situation that affects many of us who receive Social Security benefits. I ask that you read the following and then respond to a few questions I have added:
(Alexandria, VA) Social Security beneficiaries have lost 22 percent of their buying power since 2000, according to the 2015 Survey of Senior Costs by The Senior Citizens League (TSCL). The findings show a dramatic drop in inflation over the past year, due almost entirely to the drop in oil prices. “The deflationary trend, while good news for some consumers, spells trouble ahead next year for retired and disabled beneficiaries who depend on Social Security for most of their income,” says TSCL Chairman Ed Cates.
In most years, Social Security beneficiaries receive a small increase in their Social Security checks, intended to help them keep up with rising costs. But according to the 2015 TSCL survey of typical senior costs, since 2000 the Cost of Living Adjustment (COLA) has increased benefits just 43 percent while typical senior expenses have jumped 74 percent. Recently the Social Security Trustees confirmed that there would be no annual COLA for 2016 — which TSCL earlier forecast in May.
Inflation has been at historic lows in recent years and seniors received a COLA of just 1.7 percent this year. “While there’s been some temporary improvement in the buying power of Social Security benefits recently, the drop in inflation is now so large that there is no COLA expected for 2016,” says TSCL Chairman Ed Cates.
Going without any COLA has long-term consequences resulting in lower total retirement income,” Cates says. “This problem also affects military retirees and others who receive COLA adjusted benefits.,”
According to the TSCL survey, people with average Social Security benefits in 2000 received $816 per month, a figure that rose to $1,166.30 by 2015. However, those individuals would require a Social Security benefit of $1,419.00 per month in 2015 just to maintain the same buying power they had when they first retired, the study found.
The study examined the increase in costs of 34 key items between 2000 and January 2015. The items were chosen because they are typical of the costs seniors must bear. Of the 34 costs analyzed, 22 exceeded the amount of increase in the COLA over the same period. The selected items represent eight categories, weighted by approximate expenditure.
“This study illustrates why budget proposals that would cut the growth of COLAs would put millions of older and disabled Americans at risk of insufficient income to cover more growing expenses,” says Cates. “To put it in perspective, for every $100 worth of expenses seniors could afford in 2000, they can afford just $78 today.” A majority of the 59 million senior and disabled Americans who receive Social Security depend on it for at least 50 percent of their total income, and one in three beneficiaries relies on it for 90 percent or more of his or her total income.
The COLA situation may not affect you, or maybe it does quite directly. The effect of inflation, even the "official" low level of the last several years, takes its toll. No one is unaware of the increased medical costs for prescription drugs, insurance premiums, copays and deductibles, even for those on Medicare. A couple should expect to spend an estimated $245,000 (in today's dollars) on health care in retirement, according to Fidelity’s 2015 Health Care Cost Estimate, as reported in Forbes Magazine.
The costs at the grocery store are just as dramatic. Ground beef has increased 130% since 2000, a dozen eggs are up 117%, even a loaf of bread is 63% more expensive over the same time period. Electricity is up 63%, real estate taxes 127% higher.....for those on fixed incomes these increases can be very damaging.
So, my questions to you are these:
1) Realizing that so many seniors depend on Social Security for a major portion of their income should the government use a calculation that insures monthly payments at least keep pace with the inflation of the true cost of living?
2) Because the system will be in serious financial straits at some point in the not too distant future, is this something that Social Security simply can't afford, even if the result is real loss of buying power over time?
Frankly, I am not sure what my answers would be to these two questions. One part of me says if we can afford a half a trillion dollar defense budget, or to send a spaceship to Mars, then maybe our priorities toward the most vulnerable part of our society need adjusting. Many seniors cannot reasonably find ways to increase their income, so they are truly stuck. Official inflation calculations do not take into account the dramatically increased costs that are part of our daily life.
On the other hand, it is not just those on Social Security who have to deal with wages that have barely budged over the last decade. Is it fair to make those on Social Security a little better off while wage earners are not made whole?
What are your thoughts? What is fair and compassionate?