Is a 3.6% Social Security bump enough?
The first Social Security increase since 2009 means an average raise of $39 a month for retirees. What will $39 buy?
This post comes from Giselle Smith at MSN Money.
Could you live better on $39 more a month?
That's the average increase predicted for retirees in 2012 thanks to a cost-of-living adjustment announced today by the Social Security Administration. Though happy for the 3.6% increase -- which amounts to an average annual bump of a little less than $500 -- many seniors aren't counting the extra dollars just yet.
The first COLA in Social Security and Supplemental Security Income benefits since 2009 impacts 55 million people getting Social Security, and more than 8 million on SSI, who will receive an average increase of $18 a month.
However, Medicare is expected to announce next week the 2012 cost of Part B premiums -- which cover doctor visits and outpatient services, and are deducted from most beneficiaries' Social Security checks. The predicted increase in premiums could take a bite out of the COLA increase.
Will the net result be enough to make a difference? Many say no.
"My costs this year alone jumped 6%. Somebody is 'cooking the books.' COLA supposed to go hand in hand with inflation," commented one reader on MSNBC.
"This pay increase of $40/mo won't even put me back where I was two years ago," wrote another. Post continues after video.
"Seniors have basically been in a standstill for two full years, and some of that breathing room is going to be wiped out by the fact that premiums are going up," says Cathy Weatherford, CEO of the Insured Retirement Institute, a trade association for providers of annuities, insurance and financial planning, MSNBC reported.
Many advocates and seniors say the COLA is not enough to offset the rising cost of necessities such as food, utilities, and health care.
"Unfortunately, the increase announced today will not completely ease their burden," said Nancy LeaMond, executive vice president with AARP, according to The Hill. "Medicare premiums are also expected to rise for many. And with the decline in housing values, deep losses to retirement and savings accounts and skyrocketing health and prescription drug costs, millions of older Americans continue to struggle to make ends meet."
Nancy Altman, co-director of Strengthen Social Security, said out-of-pocket health care costs rose 14.1% for seniors and people with disabilities in the past two years, according to The Associated Press.
Many retirees rely on Social Security for the majority -- sometimes as much as 90% -- of their income, according to the Social Security Administration. Retirees also spend their income differently from working taxpayers.
As the AP reported:
"The COLA index is based on average price of goods and services as consumed by workers, not by retired people," says Polina Vlasenko, an American Institute for Economic Research fellow. "Retirees tend to spend more on health care and goods and services, and those prices increase faster than the national average. So COLA may not fully compensate for what that they spend their money on."
Doing the math
The amount of the COLA is determined by a formula specified by the Social Security Act. COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), which are calculated by the Bureau of Labor Statistics. If the CPI-W stays flat, or decreases, there is no COLA, but Social Security and SSI benefits stay the same.
Since COLAs began in 1975, the only years when inflation was too low to warrant an increase have been 2010 and 2011 -- after a 5.8% jump in 2009.
Senior advocacy groups, including AARP, argue that the CPI-W is not an appropriate measure of inflation for older adults, because it doesn't reflect the actual costs of goods they purchase, including a much larger portion of income on medical care.
But changing the formula, as some propose to do, could make things worse. CNN reported:
Going forward, Social Security beneficiaries may not see such generous COLA increases. As part of the debt reduction talks, lawmakers are looking at changing the formula upon which the annual increase in based, said David Certner, AARP's legislative policy director. This could lower the COLA increase by several tenths of a percentage point, which may not sound like much but adds up over time, he said.
For 2012, is 3.6% a reasonable increase?
More on MSN Money:
I haven't seen a raise in 5 years and my health insurance premiums go up every year and the coverage goes down doesn't seem to matter I guess if your retired or not its all going downhill
LBJ -- The Democratic President pushed Congress to pass a law that placed all tax money collected for use with Social Security to be placed in the General Tax Funds..... THIS IS WHERE IT ALL BEGAN...The so called "Great Society"...UNDER THE DEMOCRATICALLY CONTROLLED CONGRESS... . appears to be coming apart at the seems... all succeeding Congresses have "kicked the can down the road" and basically not raised taxes to cover 'THEIR' spending projects but rather left an IOU in the SS Fund...sad and probably unethical..
The Federal Gov't. is disgraceful. Bend over seniors, the Obama government is coming to help you. They are unwilling to give seniors a legitimate cost of living increase but they sure have money to throw to the people who donate to their campaigns (Solindra $530 mil.) and their union buddies ($30+ billion) to re-hire public employees that municipalities can't afford.
According to VP Joe Biden if Obama doesn't get the money, store owners will get shot in the head and women will get raped. I think there should be a cartoon made with Joe B. as the main character. "Joe" was supposed to watch and make sure the tarp money was spent correctly and he was so busy talking he totally failed that job. There was supposed to be billions for road and bridge repair which was frittered away on other things. Now "Joe" and Obama want more money to fix roads and bridges. I don't think so.
yes 3.6 is better than zero, but if you realize anything from the increase, with the change in your deduction for medicare , then it will be a lot less than 3.6, probably zero so it looks like we stay about the same as we are this year, except groceries, gas, taxes
and insurance are going up again, good luck seniors you will need to keep your head above water.
Congress has kept on changing the COLA formula to keep costs down rather than coming up with something fair that really represents the costs for seniors.
I did my best to save as much as possible in my 401K plans but my employers quit putting in their share, several economic bubbles have driven down the value of my investments and inflation has taken out a big chunk of what I have available for my retirement. Most of my former employers were taken over and I am left with a couple of small annuities that will always remain small. How could I have planned for all that to happen to me?
Social Security is the main source of my retirement income. Now that my savings and investments have shrunk, I will have to start withdrawing from my 401K and IRA funds when they are at their lowest point..
What I will end up with when I get older is enough to buy one bullet for one cheap handgun, thank you NRA, to end it all. Some how I thought the American Dream would end in a better way.
The uninformed are still standing up for Obama and still singing "Bushs Fault".
........Well, this is for the truly UNINFORMED, the annual COLA is not set by the President, whether it be Obama, Bush, or Thomas Jefferson. The COLA is determined by law, which was crafted by Congress in the '70s. The law determines the COLA for each year, and only Congress can change the law. If you are going to throw rocks at someone over this, at least select the correct target. PS, I agree that the formula set by Congress is complete FUBAR, for it seems to totally ignore the rising costs of health care, food, and energy. AARP has a good TV add about SS, ending up telling Congress that there are 15 million seniors waiting to vote in 2012, it wouldn't hurt to send them an email before that just to keep them aware of your feelings and your right to vote!
...Stromprophet, increasing the full retirement age and increasing the income cap should be sufficient, there should be no need to cut benefits already earned.
We do have a way to show congress and the president how displeased that we are with this COLA.
FLOOD THE WHITEHOUSE WITH EMAILS & FLOOD YOUR CONGRESSMAN WITH EMAILS.
THEN, VOTE THEM ALL OUT IN 2012
Everyone should read the report by USA Today on what the govt pays out in federal pensions compared to what it pays out to SS.FOOOOOkin amazing how much those people are paid in
pensions. Plus they put in NOTHING of their own ,It all comes from taxes.
Trouble with both
concervatives and liberals is they are both reactionaties. Reactionaries want to go back to the way things were. Liberals want to continue spending other people's money by borrowing or taxing. Concervatives want spend less like we used to.
You can never go back in history. We need progressives in the White House and in congress who will remove the present government restraints on all American industry. New energy sources, new gas lines under ground that won't blow us whole neighborhoods, a change to natural gas run cars an American energy source thatese changes and much more will put several million people to work in private jobs . That will give the tax money we need also We need elected officials willingh and able to solve our nation's problems instead of only thinking 'how can I get re-elected'.
PLEASE this is a serious matter that will effect all for the rest of our lives. If you don't get involved you will reap the rewards latter..... Emails to congessman and Whitehouse . Thanks sharriannie for your post!!..
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