The annual Social Security cost-of-living adjustment (COLA) is about to set another record low. According to estimates by TSCL’s COLA expert and Advisor editor Mary Johnson, the COLA may be just three tenths of a percent (0.3%) in 2017. That would set a new low for years when inflation was high enough for a COLA to be paid, and would raise monthly benefits only $3.00 per month for the average $1,000 benefit.
Over the past seven years COLAs have flat-lined — averaging just 1.2%. And while the growth of Social Security benefits has been at record low rates, retirees report that household expenses are still climbing. That trend is causing people to spend retirement savings more quickly, go into debt, or both. This year Social Security recipients received no COLA at all, but 73% of TSCL’s 2016 Senior Survey participants reported that their monthly expenses grew by more than $79 over the past twelve months.
“Social Security’s ‘shortfall’ isn’t just about the formidable financing problems that the Social Security Trust Fund faces in the next 18 years or so,” says TSCL’s Executive Director, Shannon Benton. “An even bigger ‘shortfall’ will impact the Social Security income of more than 60 million people who rely on their benefits every day,” Benton says. Social Security benefits, and annual cost-of-living adjustments (COLAs) are so meager that today they only replace about 35% of pre-retirement paychecks. A growing number of retirement experts say that expanding, not cutting, Social Security is a real need as more people retire with low or no retirement savings.
With people living longer and retirements that can last 30 years or more, modestly - higher benefits are needed by the majority of people at or nearing retirement, a growing number of retirement experts say. A number of national studies indicate that millions of older Americans are entering retirement without the financial resources to cover longer retirements. A 2015 report from the U.S. Government Accountability Office says about one-half of households 55 and older have no retirement savings, and many of those that do have some savings, don’t have enough. They run the risk of falling short of income, going into debt, and falling into poverty.
Older voters think Social Security should be strengthened, but are opposed to cutting benefits. According to the Senior Survey, 71% of older voters think Social Security should be expanded to provide modestly higher retirement benefits and more fair COLAs. An analysis for TSCL estimates that if COLAs were indexed using a “senior” consumer price index — the government’s Consumer Price Index for the Elderly (CPI-E) — Social Security recipients would receive a 1.7% percent increase instead of an estimated 0.6% COLA in 2017.
TSCL’s Senior Survey indicates that older Americans are united in their support for Social Security and that 78% of TSCL’s survey participants favor raising the taxable cap on earnings so that all workers pay their fair share on all earnings. Currently earnings over $118,500 aren’t taxed for Social Security purposes. “This means the nation’s highest earning people, like millionaire CEOs, pay a far lower percentage of their total income into Social Security than bus drivers and secretaries,” says Benton.
TSCL is working with Congress to pass legislation that would lift the taxable maximum cap, expand Social Security by boosting retirement benefits and provide greater retirement security by using a “seniors-only” consumer price index, the CPI-E, to determine the annual cost-of-living adjustment (COLA).