UPDATE: Since this post went live in June 2008, the state of Social Security benefits has been dramatically altered. Please refer to the information below for the most up-to-date news regarding the changes made to this important program. For further details on the COLA, visit www.ncoa.org.
On Oct. 16, the Social Security Administration announced a cost-of-living adjustment (COLA) of 5.8 percent for 2009, the largest increase since 1982. Social Security COLAs are based on increases in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) over the past year.
In January, the COLA will be applied to the Social Security benefits of over 50 million Americans. The increase for Supplemental Security Income (SSI), which goes to more than seven million beneficiaries, will begin on Dec. 31. The average Social Security benefit will increase $63 per month, compared with an average $24 per month increase in 2008.
Earlier this year, the Congressional Budget Office published a little-noticed estimate that forecasts seniors will receive just a 2.8 percent increase in their Social Security checks beginning in January 2009.
Despite the increase, at least five million people aged 65 and over will remain in poverty because senior costs are rising significantly faster than the annual Social Security Cost of Living Adjustment (COLA).
Between 2001 and 2008, Medicare Part B premiums have soared by more than 93 percent while the COLA has crept up just 19 percent, leaving many seniors on their own to cover all other rising costs. Part B premiums cover doctor’s visits, tests, and outpatient hospital care.
Although the COLA is intended to help seniors keep up with inflation, a recent study by The Senior Citizens League (TSCL) that analyzed eight key expenditures found that people 65 and over have lost 40 percent of their buying power since 2000. Expenses such as home heating oil and gasoline have more than doubled since the beginning of the decade, while food staples such as potatoes and butter have increased by 47 and 39 percent, respectively.
A majority of the 48 million Americans aged 65 and over who receive a Social Security check depend on it for at least 50 percent of their total income, and one in three beneficiaries relies on it for 90 percent or more of their total income.
“Social Security is supposed to protect seniors in need – but with five million seniors below the poverty line, it’s clear the system is failing them,” said Shannon Benton, executive director of The Senior Citizens League. “If it’s true that a nation’s greatness is defined by how well it treats its most vulnerable citizens, then we must do a better job of protecting impoverished seniors.”
To help offset the cost of Medicare Part B, TSCL is lobbying for a change in the Consumer Price Index (CPI) used to determine the COLA. The government currently calculates the COLA based on the CPI for Urban Wage Earners and Clerical Workers (CPI-W), a slow-rising index that tracks the spending habits of younger workers who don’t spend as much of their income on health expenditures.
However, the government also tracks the spending patterns of older Americans with the CPI for Elderly Consumers, or CPI-E. By tying the annual increase in the COLA to the CPI-E, seniors would see much needed relief in their monthly checks.
If the shoe doesn’t fit, don’t wear it.