By Mary Johnson, editor
Inflation, as measured by the U.S. Bureau of Labor Statistics’ consumer price index, has taken a deep tumble over the past year, meaning older Americans will have to settle for a cost-of-living adjustment of 1.6% in 2020 after getting a 2.8% increase this year.
While economists are still sorting out the reason for the fall in inflation, I recently asked what you have observed in the way of prices. Are the goods and services on which you typically spend most of your budget really falling — or are those prices actually going up?
I had the opportunity to interview Florida retiree Joe S., who told me how he is impacted, living in one of the most hurricane prone areas in the U.S.— Brevard County, Florida. In September, after hanging 20 hurricane shutters on his home, Joe and his wife evacuated for three days and rode out hurricane Dorian 110 miles inland. Gas, hotel, food costs totaled $600.00. Unexpected expenses like these are hard to plan for.
Natural disasters can affect the consumer price index by showing up as higher costs, particularly when gasoline supplies are disrupted, and large numbers of people are forced to evacuate needing shelter and food away from home. But Joe (like virtually all of you who sent in an email) thinks that our government economists may be cooking the books in their methods of measuring price increases.
Homeowner’s, auto, and flood insurance are three of Joe’s fastest rising costs, since he lives on the eastern coast of the Florida. The insurance industry says that homeowners and auto insurance costs are impacted by both the number and intensity of severe storms in recent years.
In fact, according to research by The Senior Citizens League, homeowner’s insurance has grown 199 percent since 2000, making it one of the fastest growing costs that retirees face, second only to prescription drug costs. Joe reports that his homeowners and car insurance have increased every renewal period over the past two years. His homeowner’s premiums rose from $1,284 a year to $1,566, an increase of 22 percent. Joe’s auto insurance premiums increased $200 over the last four renewal periods, which are every six months, despite no tickets or accidents. Government subsidized FEMA flood insurance this year increased 7.4%.
“Many food companies decrease the size of their containers, while keeping the same price,” Joe said in his comments about price increases that he’s observed. “Cost increases get masked when container sizes shrink.” For example, after last year’s hurricanes, a major orange shortage nationwide led to shrinking orange juice bottles. “Brands that originally sold in 64 oz containers, downsized to 59 oz and then to 52 oz — a 20 percent reduction in what our orange juice money buys today,” Joe says.
Joe sees a solution for low COLAs and Social Security’s long-term solvency issues. Currently the highest paid employees, including CEO of top U.S. companies only pay Social Security taxes on the first $132,900, even when they pull in multi-million dollar salaries. “The future of Social Security would be brighter, if the taxable maximum earnings to which the Social Security payroll tax is applied would include the high earners,” Joe says.
Many of you agree with Joe. About 74% of survey participants in TSCL’s Senior Survey support applying the 12.4% Social Security payroll tax to all wages above the annual maximum which is $132,900 in 2019. This one fix alone is estimated to close roughly three - quarters of the Social Security financing gap. Let’s ask our Members of Congress to get on board. Read more about sustainable solvency for Social Security in our latest Benefit Bulletin, “Social Security Legislation Would Provide 75 Years of Solvency To Social Security.”
