Digging Deeper on Changes to the Social Security COLA

Understand the fine print behind a proposed ‘minor adjustment’ to the Social Security COLA calculation. (click photo to view video)

No one with any common sense wants to see our politicians take us over the fiscal cliff. And I think most people with common sense also realize that Social Security, and the tougher issue of Medicare, are worth thoughtful debate and discussion so these vital programs can be put on stronger footing for future generations.

However, when budget cutters take aim at today’s Social Security recipients, it’s time to ask questions and dig deeper into the fine print.

A proposal on the table to tweak how Social Security calculates its cost-of-living adjustment (known as the “chained CPI“) sounds pretty harmless, right? The problem is that when you crunch the numbers, the result is anything but harmless.

Does getting by on $1,236 each month for housing, food, utilities, medication and transportation sound easy? That’s the harsh reality for about one in three seniors.

This proposal to modify the inflation index would be a hard hit for the millions of current retirees who are barely making ends meet. The sad truth is that one-third of seniors rely on Social Security as their main source of income. We’re talking about people unable to fund a 401(k) or an IRA, and without access to the pensions that some of their peers have. Not every senior is lucky enough to live in a home that’s been paid off.

Every month, 33% of Social Security recipients live the equivalent of paycheck-to-paycheck through no fault of their own. If this Chained CPI proposal gets a green light as part of a year-end political deal, figuring out how to pay for the roof over their heads plus their utility bills, plus medications they need, will get even harder. And with today’s tough economy and unemployment rate, many seniors don’t have Boomer or Gen X kids who are in a position to help.

This brief video explains the fine print around this ‘little tweak.’

Is it right to ask seniors who have worked hard all their lives – and in many cases, who already have to choose between food and medication – to sacrifice benefits they have earned to reduce a deficit that they did not create? And keep in mind that this is the only Social Security proposal on the table that would affect current retirees (it amounts to about $112 billion out of their pockets over 10 years).

Will adjustments be needed to strengthen Social Security over the long term for future generations? Of course; there are multiple options being discussed. Older Americans know that the status quo can’t last for the long term. They want their children and grandchildren to have access to the same form of safety net that has served them well.

Anyone who is trying to amp up generational warfare and scare younger people into thinking that Social Security will not be there for them in any form is misinformed at best. (See intergenerational expert Kristin Maschka’s take on that here.) Social Security will be just as important for future retirees.

Strengthening Social Security for the long haul shouldn’t mean taking money away from today’s seniors in the form of a back-door benefit cut. Remember, we’re talking about people who are trying to get by on less than $1,236 a month. If you agree, you can help send that message to the people you elected and tell them not to adopt the chained CPI measure as part of the year-end budget negotiations.

The greatest generation, our country’s growing ranks of baby boomers, and all generations deserve better from our politicians.