Social Security Benefits Impact Estimated at $4,000 Over Past Five Years
For an unprecedented sixth consecutive year, Social Security recipients will get a record low cost-of-living adjustment (COLA) of 1.7% in 2015. Low COLAs are wreaking havoc on the lifetime benefits received by today's Social Security beneficiaries, forcing millions of older Americans to spend down their retirement savings far faster than they ever thought they would. An increase of that much will raise the average benefit of $1,190 by just $20.20.
The increase is significantly lower than the 3% COLAs averaged from 2000 through 2009. In fact, over the past five years, COLAs reached record lows averaging just 1.4%. No COLA was paid at all in 2010 and 2011.
How do low COLAs impact your overall retirement income? A new analysis for TSCL found that had inflation averaged the more usual 3% since 2009, beneficiaries would have received nearly $4,000 (on average) more in benefits over the past five years. Because COLAs compound over time like interest, the analysis found that people who had average monthly benefits of $1,062 in 2009 would have had a benefit that’s $95 per month higher this year.
Medicare Part B premiums are expected to remain about the same amount as this year, but Medicare Advantage, Medigap supplements and Part D plans may be imposing higher premiums, deductibles and cost-sharing. "TSCL strongly recommends that Medicare recipients review the materials from health and drug plans to understand changes and new costs for 2015," says TSCL Executive Director, Shannon Benton. "Don't shy away from comparing plans and making changes when necessary," she urges.
TSCL supports legislation that would provide a more fair COLA by basing the annual boost on a consumer price index that's based on the expenditures of older Americans and would guarantee that beneficiaries would receive a COLA no lower than 3%.
Source: Social Security Administration, October 22, 2014.