Alexandria, VA (April, 2013)
President Obama's new budget proposal would trim Social Security cost-of-living adjustments (COLAs). Proponents say it's a relatively minor technical fix that calls for switching to a "more accurate" and more slowly-growing measure of inflation — the "chained" consumer price index (CPI). They argue that the current CPI overstates the rate of inflation, and that Social Security benefits are rising more than necessary to preserve the standard of living for beneficiaries.
But a new poll indicates that eighty-nine percent of seniors who receive Social Security say that expenses are rising substantially faster than COLAs even under current law. Ninety-seven percent of survey respondents say that their monthly Social Security benefits rose by less than $39 in 2013, but only 11 percent said their expenses rose by less their than COLA. Some 89 percent of seniors said their monthly expenses rose by more than $39, including 40 percent who said that their monthly expenses rose by more than $119 in 2012, according to new survey released by The Senior Citizens League (TSCL), one of the nation's largest non-partisan seniors groups. Not surprisingly, when polled on whether they supported the proposal to switch to a more slowly-growing COLA index, 77 percent of seniors oppose the proposal.
"When COLAs do not rise enough to keep pace with inflation, beneficiaries are left to dig deeper into savings — if they have any savings," says TSCL Chairman Larry Hyland. In fact, median annual expenditures for people over 65 are about $26,486 — almost twice the average Social Security benefit of $13,8601.
"A major reason that senior costs rise more quickly than the COLA is healthcare costs," Hyland says. Seniors and disabled adults spend a larger share of their income on healthcare costs, which tend to increase several times faster than overall inflation. According to the new survey, a majority, 65 percent, said they spent up to 33 percent of their Social Security benefits on healthcare costs. Another 22 percent of seniors said they spent from 34 percent to 50 percent of their benefit on healthcare.
Just how much would "chaining" the COLA cost you? "Make no mistake. This is a benefit cut. It's not a minor technical fix," says Hyland. "This is no small change, especially as it compounds and grows deeper over time," Hyland notes. "A married couple with an average benefit of $2,500 per month could lose more than $57,369 over a 30-year retirement. By the end of the period, monthly benefits would be about $375 lower than they otherwise would have been," Hyland points out.
TSCL has developed a new online calculator based on chained CPI data to help people learn how much this change would cost. To find out how much you could lose by "chaining" the COLA, use the Chained COLA Calculator.
To get a free copy of TSCL's The Social Security & Medicare Advisor, sign up online or send a self-addressed stamped envelope and $1 for shipping and handling to: The Senior Citizens League, 1001 N. Fairfax St., Suite 101, Alexandria, VA 22314.
