Society Security recipients have been waiting for years for a decent increase in their checks. It will come next year, but it’s too little, too late.
The Washington Post’s Heather Long puts the numbers in perspective: The average check is currently $1,377 a month, so the monthly increase, on average, comes to $27.
“The raise is a cost-of-living adjustment (COLA) that’s meant to keep up with higher costs of everything from rent to medications,” Long wrote. “But many seniors think the government’s calculations are flawed.”
Gary Koenig, vice president of financial security at AARP told Long: “If you polled seniors, 10 out of 10 would say the COLA is not keeping up with their costs.”
“An estimated 61 percent of retirees rely on their benefits to provide at least half of their income,” Maurie Backman wrote for the Motley Fool. “The problem, however, is that Social Security was never designed to cover seniors’ living costs in their entirety. So when we ask whether the average American can live off Social Security alone, the answer is an emphatic no.”
Here’s the thing, Long wrote: “The Social Security Administration bases the COLA on a measure of inflation called CPI-W, a statistic that captures how fast costs are rising for workers. But most seniors are retirees. Health care is their biggest expense, and it’s one of the fastest-rising costs in America.”
Whether it’s meant to be or not, Social Security is the sole source of income for a lot of folks.
As Long points out: “The monthly payments lifted more than 26 million Americans out of poverty last year, according to the Census Bureau, making it the most effect anti-poverty program the government has.”
Nancy Altman, president of Social Security Works, said the COLA increase is not enough after years of no or minuscule increases. “For many beneficiaries, even this small adjustment will be wiped out by increases in Medicare premiums and other health-care costs,” she said. “It’s long past time for Congress to update the formula used to calculate the yearly COLAs so that it reflects the costs that seniors and Americans with disabilities face every day.”
When the increase was announced, #SocialSecurity started trending on Twitter.
Now is a good time to read 12 facts the Social Security Administration wants you to know.
Your View Matters
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Retirement Rants and Raves
I’m interested in your experiences or concerns about retirement or aging. This space is yours. It’s a chance for you to express what’s on your mind. Send your comments to email@example.com. Please include your name, city and state. In the subject line, put “Retirement Rants and Raves.”
Last week, I asked you to weigh in on the platinum pensions reaped by corporate executives. For example, former Equifax chief executive Richard Smith, who “retired” after a major data breach at the credit bureau, is getting a pension worth more than $18 million.
“Not only are such miscreant fat cats undeserving of their pensions, they may have tax advantages as well,” wrote Mike Mundorff of Salt Lake City. “At least one iteration of the GOP tax ‘reform’ plan has proposed eliminating the tax favorability status of traditional 401(k) plans. (In that case, what would differentiate them from a Roth IRA?) But as far as I have read, defined-benefit pension plans — which as you note have been mostly supplanted by defined-contribution plans — will be taxed upon distribution. The boards who approve these outrageous retirement packages should have their feet held firmly to the fire. Shareholder clawbacks, anyone?”
Robert Biesterfeld of Orono, Minn., doesn’t see a problem, writing: “Good grief! They didn’t steal it from you or me. Hooray for capitalism. Envy is petty.”
Is it really envy or a concern about equity?
“I am one of those fortunate to have an adequate pension, as both my husband and I worked all our lives and saved quite a bit,” wrote Marg Goodlin of Columbia, Md. “We started saving in our twenties. Since my daughter and grandson moved back in with us a year ago, it has been more difficult, but possible. We are drawing on our pensions and are not happy with that. However, what these executives are making in retirement (often forced retirement after bad mistakes) makes me furious. Not for me, but for all those living and working with inadequate nonliving wages and poor pensions.”
The pay gap between CEOs and workers is much more than you might realize. A Harvard Business School study found a huge gap between Americans’ perceptions of CEO pay and reality. According to the study, Americans believe that CEOs make about 30 times what the average worker earns. But the truth is they make more than 350 times what the average worker earns.
Dorothy of Washington state wrote: “I think this is criminal! Think of all the low-wage workers in a big corporation supporting that by continuing to work for a nonliving wage. Income inequality must change.”
Bonnie Svarstad, 75, a retired professor from Madison, Wis., said that CEOs pulling down so much money in pensions is “infuriating, especially when we all know that they are likely to be: white men, or men who are most likely to get huge tax cuts from GOP tax ‘reforms.’ ”
Anna of Seattle wrote: “I think both the pay and the pensions for CEOs are obscene. They are paid and pensioned off with far more money than they could possibly need, while the lower-paid workers are left out in the cold, some literally. When corporations pay their workers so little that they have to go on welfare, that means that taxpayers are subsidizing the company’s product(s), which is just wrong. Working 40-hour weeks should pay a person enough to purchase the basic necessities of food, clothing, and shelter. I do not know how to change the culture of remuneration so that there is more equity, but it does need to change. With pensions going the way of the dinosaurs, more and more people are facing retirement with far too little. Too many people are paid too little to save anything.”
James Nobil of Washington, D.C., had a rant and an idea. “The answer may be as simple as eliminating all business tax deductibility and tax credits — of every business expense and purchase — for companies that provide for retirement contributions of pensions to executives (or any employee) that are even one-thousandth of one percent more generous than those of ALL other employees (on a percentage of salary basis),” Nobil wrote. “Obviously, higher-salaried folks should get higher pensions, but not higher as a percentage of earned income, with some getting even none. After all, why should all Americans, including those at the lower end of the income spectrum, be subsidizing these overly generous pensions for a select few at the top of corporate America? Fairness and equity suggests that it ought to be the other way around.”
“You ask what I think of these so-called platinum pensions for major corporate CEOs. I have a one-word answer, ‘ridiculous,’ ” wrote Thomas Druitt of Paducah, Ky., a frequent commenter. “It’s not like these folks have not been getting paid tens of millions of dollars each year for a decade or more in most cases. None of these former CEOs would run the risk of being made homeless or relying upon charities and taxpayer-funded safety net programs if these platinum pensions went away completely. These platinum pensions are a waste of scarce capital by the corporations that bestow them, a fleecing of both corporate shareholders and to the extent these plans take advantage of tax deferment loopholes in the IRS code a fleecing of taxpayers as well. The corporate shareholders being fleeced I might add are to a large extent the exact mutual funds that regular folk have their 401(k) retirement savings parked with.”
Newsletter Comments Policy
Please note it is my personal policy to identify readers who respond to questions I ask in my newsletters. I find it encourages thoughtful and civil conversation. I want my newsletters to be a safe place to express your opinion. On sensitive matters or upon request, I’m happy to include just your first name and/or last initial. But I prefer not to post anonymous comments. (I do make exceptions when I’m asking questions that might reveal sensitive information or cause conflict.)
Have a question about your finances? Michelle Singletary has a weekly live chat every Thursday at noon where she discusses financial dilemmas with readers. You can also write to Michelle directly by sending an email to firstname.lastname@example.org. Personal responses may not be possible, and comments or questions may be used in a future column, with the writer’s name, unless otherwise requested. To read more Color of Money columns, go here.
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