If you're like most seniors, you probably depend on Social Security for at least half of your income. But how well does the annual cost-of-living adjustment (COLA) protect you from rising costs? TSCL will soon release some answers to this question with the results of its 7th Annual Survey of Senior Costs. In recent years these surveys have indicated that Social Security beneficiaries lose a considerable portion of their buying power — as much as 31 percent — in as little as the first decade of retirement.
With many seniors spending 30 or more years living in retirement, a COLA that keeps up with rising costs is essential protection for making retirement savings last, and for preventing seniors from falling into poverty. Yet over the past five years, Social Security benefits have grown on average about 1.4% per year — less than half the average rate of growth in previous years. Recent projections by the Congressional Budget Office for 2015 suggest another low COLA of 1.6% next year.
TSCL's research has consistently found that Medicare Part B premiums rank as one of the fastest growing senior costs. Yet Medicare premium costs are not included in the measure currently used to determine the annual COLA — one major reason why COLAs do such a poor job of keeping up with rising healthcare costs. TSCL continues to lobby for a more fair and accurate COLA and supports legislation that would use a seniors' index — like the Consumer Price Index for the Elderly (CPI-E) — to determine the annual boost.
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 fuller picture, this table spans a 34 - year period, the length 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 atsame 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|
Sources: "The Budget and Economic Outlook: 2014 to 2024," Congressional Budget Office, February 2014. Average Price Growth Data 1980 to 2014, Bureau of Labor Statistics, www.bls.gov, accessed on March 5, 2014.