The Social Security Cost Of Living Increase Is Not Keeping Up
Many seniors now feel that the yearly Social Security cost of living increase is failing to keep up with the soaring prices of everything from gas and heating bills to grocery and prescription drugs. Consequently, seniors are suffering, and they are suffering badly.
In 2005, as an example, the Social Security cost of living increase was only 2.7 percent. But should you fill up your car at the gas pump, then you probably noticed the 28 percent jump in gas prices? When you paid your heating bill, you likely noticed that the price of home energy soared by double digits too.
Meanwhile, the Federal Reserve kept raising its speed last year too, meaning that seniors saw as their diminished spending power was cut even further as they paid higher prices on credit card bills, auto loans, and adjustable rate mortgages.
The absence of a fair Social Security cost of living increase affects seniors in a very real manner. She follows the news, understands what is happening with her friends and detects even subtle changes in prices. She told us that her beloved oranges are getting too expensive to buy at her neighborhood grocery store.
“I really don’t believe the politicians care for seniors at all,” she told us. “I have friends whose sole source of income is Social Security, and they fight each month to make ends meet. Each year, it becomes worse. The politicians don’t care about people like them”
How The COLA Hurts You
The COLA is connected to fluctuations in the Consumer Price Index (CPI). While the public commonly thinks of the CPI as a single indicator, this isn’t the situation. There are several CPIs–every one of which measures inflation increasing in various prices, depending on which “market basket” the government is considering.
However, the government calculates COLAs using one of the most slowly growing indexes-the Consumer Price Index for Urban Wage Earners and Clerical Workers. It surveys the services and goods that younger employees use. But younger employees have far different spending habits compared to seniors, who must spend a much greater percentage of their income on healthcare.
After the government calculates that the COLA to an 80-year-old war veteran employing the spending patterns of a 28-year-old young mommy, something has gone horribly awry.
The government will not monitor senior costs, however, and has done so since 1983-maintaining that the Consumer Price Index for Elderly Consumers (CPI-E). If the government had used the CPI-E, seniors could have gotten a COLA increase of 3.1 percent last year rather than 2.7 percent. Does such a small proportion growth matter? In one year, not much. Over time, it certainly does.
By way of example, if Fran retired with an average benefit of $360 in 1984, she would have received about $8,629 over the previous 21 years had the government used the CPI-E to compute her COLA. With compound interest, that means that she would have had tens of thousands of dollars more to help with medical expenses, home energy costs, and mortgage payments–and she might have purchased as many oranges as she would have liked.
What We Can Do
Over the past 3 months, we’ve been hearing from hundreds of seniors throughout the country. Even though Medicare is dominating the headlines, the price of Living Allowance is dominating their thoughts.
Although we seniors turn out in large amounts during every election cycle, our agents too frequently take our votes for granted. Only by introducing a unified message in massive numbers will we affect legislators to take us with all the seriousness we deserve.