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Cut Social Security COLAs?

By Jennie L. Phipps · Bankrate.com
Thursday, June 30, 2011
Posted: 2 pm ET

As Congress struggles with ways to reduce the federal deficit, one of the approaches that appears to be among the most likely to be adopted is a revision in the way the Consumer Price Index is calculated.

The CPI measures how much the cost of the things people buy is affected by inflation. The chained CPI, which the Bureau of Labor Statistics has calculated in addition to the classic CPI over the last few years, takes into account the lifestyle changes we make when the price of something rises. For instance, if the cost of oranges goes up, a lot of us switch to buying something cheaper, like apples. The chained CPI acknowledges that and factors it into the calculation, producing a lower cost-of-living adjustment, or COLA.

The classic CPI is used to measure the cost-of-living adjustments for Social Security recipients. If Social Security is required to adopt the chained CPI instead, cost-of-living increases to Social Security will be lower, a factor for anyone doing retirement planning.

The Senior Citizens League, a nonpartisan advocacy group, is among those already lobbying against this proposal. The Senior Citizens League contends that the chained CPI doesn't take into account costs that affect people living in retirement. For instance, when the cost of medicine goes up, most older people can't switch to a cheaper brand. It just doesn't work that way.

Switching to the chained CPI would reduce Social Security COLAs by about 0.3 of a percentage point each year, the Congressional Budget Office estimates, saving the federal government more than $200 billion over the next 10 years. Most of the savings would come from lower Social Security benefits and lower retirement benefits for federal employees, whose increases also are tied to the CPI

The Senior Citizens League calculates that such a change would reduce Social Security benefits by an estimated 7 percent over a 25-year retirement. For a senior who retires in 2011 and receives the average Social Security benefit -- about $1,100 per month -- this would reduce benefits over 25 years by $18,634. The cuts would be very small in the beginning but escalate as recipients age.

Supporters of the "chained" CPI plan propose it also would increase the Social Security minimum benefit so the poorest Social Security recipients wouldn't be as affected. Nevertheless, it's clear that people who are living on nothing besides Social Security -- about 25 percent of recipients -- would feel the pinch.

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19 Comments
Harold
August 15, 2011 at 5:56 pm

Social security was invented to support big government, that's why liberal politicians always "borrow" from the fund. They pay it back with worthless bonds. SS was never what FDR said it was ie: He Lied to the American people. He also destroyed food while people were starving, look it up!

joe verdier
July 23, 2011 at 7:41 am

This is all very simple.Any politician who is involved in C.O.L.A. cuts for Social Security will need a new job. Many of us are watching and ready to end careers of deception. Most people on social security are under poverty level. Cut what ! Paid into it our whole lives.

bob
July 06, 2011 at 8:18 pm

Look the government is in our life more than ever. Squeezing the bottom so hard that all the worlds wealth pops out on top where they live. If that were not so...how could they be so rich? All of them. Since this is the chosen way America chooses to live...being governed by politicians, lets make them do the right thing such as give back some of what they have taken in salaries...retirement plans, perks and kickbacks. In addition, there should be a body of honest people formed to adujicate the wealth...for instance,,, if social security is being paid out to a retiree and that retiree is well off...or still working for a livable salary.....cut the payment ..... period. There are thousands and thousands of people in that category.

S T
July 05, 2011 at 9:26 pm

Obozo already stop the COLA's. There hasn't been one since he took office. He stated there is no inflation. I guess he hasn't been shopping for groceries or gas for the car lately?

TJeff1776
July 01, 2011 at 10:53 pm

What the herein boils down to amounts to robbing the Elderly who have little or no political clout. WOW the average is 1100- who can live on that ?? BUT some do. I suppose in tents or under a bridge. BUT now, even now, it is being proposed to reduce that via all manner of financial juggling schemes. A COLA
is nothing more OR LESS than keeping the EXACT SAME buying power each year. These political bums are something else. Suddenly
the gov't has stopped telling the public what the cost-of-living is- wonder why ?

sickofcorruption
July 01, 2011 at 5:51 pm

Some of these comments are not taking into account that once the goverment takes away from ss,they will keep taking away in other forms. Yes some seniors have food stamps but the fact is that big pharma and the cost of utilities and gas and insurance coverage for those few that paid for their homes will continue to rise.Some of these comments are heartless and selfish. Insurance companies have no sentiment either.They have car tags and property taxes as well.

DMBnagitated
July 01, 2011 at 4:53 pm

Re: End Ponzi Scheme

My My and do you believe the people that are retiring with SS now didn't have the knowledge that their working years deductions were going for the seniors livng on ss, what a new revelation we have.....I'll bet you will probably retire with less than 40 yrs under your ss# and you will really want all your money back if the market crashes again, but your sons and daughters will no doubt have a better idea, like you miscalculated financial risk and so sad too bad. They can't be expected to make up for your bad decisions. I heard they have a good government funded "Hospice facility" for you. You certainly will be treated compassionately while the working people decide whether or not they can wait on you to slowly expire with dignity.

Liz
July 01, 2011 at 11:17 am

they need to reduce today's retirees pay so that I won't have to take all the hit when it will be time for me to retire. Start the pain now, not 20 ore 30 years from now. We all need to share the burden, not just future generations

Homeless
July 01, 2011 at 8:21 am

this is one possible cut that I disagree with! What if I don't like apples and I want to eat my darn oranges!! For the drop in the bucket this adjustment would be "saving" I do NOT think it is worth it.

That is absolutely true that if the cost of meds goes up, there are not always cheaper versions. Still have to pay increased electricity, gas & oil prices. The current CPI and COLA adjustments don't even fully consider the increases of these BARE NECESSITIES. That "chained" CPI is considering things that we have a CHOICE in what we purchase. Cost of Living is going up way faster on our BASICS than on those other things...and Social Security AND "merit" increases are not keeping up. Our dollar today will be worth a lot less tomorrow.

End the Ponzi Scheme
July 01, 2011 at 8:03 am

As it stands, the average 1100 a month results in a payout 21% above the poverty line. That's plenty generous for a plan of last resort. I see no reason to have what I work hard for redistributed to others who failed to plan when they worked. Just consume every last dollar and the government will take care of me later. No, the premise of SS is a backstop to ensure you don't fall into poverty in old age. You are receiving more than the poverty income per year, medical care is covered through medicare, you can get food stamps, you can get help on rent. So, food, shelter, medical care are all provided if you are truly destitute.

But, that's not what this is about. You want to golf, take vacations, have new cars, blow money so you can keep up your unsustainable lifestyle. Sorry, you get to eat, keep a roof over your head, and get medical treatment if it's my money getting spent. If you had saved and want to spend your own on luxury items, go right ahead, it's your money to do with as you please. You have no right to the money I earn beyond meeting basic subsistence needs.