Take A Look At This New Chart From The Senior Citizens League
Alexandria, VA: Today's seniors are living longer and spending more years in retirement — which is why a Social Security cost-of-living adjustment (COLA) that keeps up with rising costs is essential protection, says The Senior Citizens League (TSCL). Yet Social Security benefits have been growing at record lows over the past five years — an average about 1.4% per year — less than half the average rate of growth in previous years.
That spells trouble for people living on fixed incomes. "When COLAs fall down on the job of protecting benefit buying power, seniors face working longer, digging deeper into retirement savings, or falling into debt and poverty," says Ed Cates, Chairman of TSCL.
The Social Security COLA is calculated using the consumer price index. There are several of them, and the government uses the Consumer Price Index for Urban Wage Earners and Workers (CPI-W) to calculate the annual boost. That index, though, doesn't measure how people 62 and older spend their money. It measures how younger working adults do. Seniors, however, have different spending patterns, and have to spend a growing share of their budget on healthcare, which in most years outpaces overall inflation.
In fact, the CPI-W does't even measure one of the most rapidly rising senior costs – Medicare Part B premiums. TSCL's research has found that Medicare Part B premiums rank as the third-fastest growing senior cost since 2000. Only home heating and gasoline have increased faster. To put the problem of Medicare's cost growth into perspective, the following table illustrates what common food items would cost in 2014, if they had increased as rapidly as Medicare Part B premiums. To give a full picture, this table spans a 34 - year period, the length of time that many Baby Boomers can expect to live in retirement. Medicare Part B premiums are twelve times higher today than 34 years ago in 1980.
What If Food Costs Grew As Fast As Medicare Part B Premiums?
|Item||Cost in 1980||Cost in 2014 if increased at
same rate as Medicare Part B
|Actual cost 2014|
|Medicare Part B, per month||$8.70||N/A||$104.90|
|White bread, per lb.||$.50||$6.00||$1.37|
|Ground chuck, per lb.||$1.82||$21.84||$3.59|
|Chicken (whole), per lb.||$.70||$8.40||$1.53|
|Eggs, large, per dz.||$.88||$10.56||$2.01|
|Apples (Red Delicious), per lb.||$.55||$6.60||$1.28|
|Oranges (Navel), per lb.||$.34||$4.08||$1.12|
|Bananas, per lb.||$.32||$3.82||$.60|
|Tomatoes, per lb.||$.70||$8.40||$1.70|
|Coffee (ground roast), per lb.||$3.21||$38.52||$5.03|
TSCL supports legislation that would provide a more fair and accurate COLA by basing it on a senior index like the Consumer Price Index for the Elderly (CPI-E). If seniors received a COLA based on the CPI-E, TSCL estimates that seniors with average benefits of $1,200 per month in 2014 would receive $32,753 more over a 30-year retirement. By their final year, their benefit would be $2,652 per year more than if the CPI-W were used.
With about 1 million supporters, The Senior Citizens League is one of the nation's largest nonpartisan seniors groups. Located just outside Washington, D.C., its mission is to promote and assist members and supporters, to educate and alert senior citizens about their rights and freedoms as U.S. Citizens, and to protect and defend the benefits senior citizens have earned and paid for. The Senior Citizens League is a proud affiliate of TREA The Enlisted Association. Please visit www.SeniorsLeague.org or call 1-800-333-8725 for more information.
2014 Annual Survey of Senior Costs, Mary Johnson, The Senior Citizens League, March 2014.