Friday, July 31, 2020

Social Security Benefit Cuts Are Here -- You Just Haven't Been Paying Close Enough Attention to Notice

This has certainly been true for me. My mobile home lot rental goes up every year, even when there is no increase in SS, and when there is an increase in SS, the rent increase takes almost all of it, and has usually been more than my SS increase.

Sean Williams
Jul 31, 2020 at 6:06AM

As one example, take a closer look at how Social Security's inflationary tether, the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), has influenced the purchasing power of seniors' Social Security dollars over the past 20 years.

Since 1975, the CPI-W has measured the price changes for a predetermined basket of goods and services. The Social Security Administration is then able to compare the average CPI-W reading from the third quarter (July through September) of the current year to the average CPI-W reading from the third quarter of the previous year. If the average has risen from one year to the next, it signifies inflation. And when there's inflation, it means Social Security beneficiaries are receiving a cost-of-living adjustment (COLA) in the upcoming year.

This may sound like a perfect system to measure the inflation that Social Security's 64 million beneficiaries are facing, but it's highly flawed. That's because, as the CPI-W's official name implies, it tracks the spending habits of urban and clerical workers, neither of which are typically seniors or Social Security beneficiaries. Essentially, this means Social Security's COLA determinant is tethered to a group of people who don't represent a majority of beneficiaries.

In plainer English, the CPI-W isn't providing accurate inflation readings for the costs seniors are facing. Important expenditures (relative to retired workers' budgets) like medical care and housing are being underweighted. Meanwhile, less-important costs to seniors, such as education, apparel, and transportation, are given added weight.

The result, according to The Senior Citizens League, is a 30% loss of purchasing power for Social Security income since 2000.


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