If you’re too young for Social Security benefits, you may not be aware that every December the Social Security Administration (SSA) sends out a notice to benefit recipients of their “benefit amount” for the coming year. It doesn’t want us elderly Americans to be surprised when the first monthly deposit of the new “benefit amount” arrives electronically in checking accounts come January 3.
Sometimes the amount actually goes up a tiny bit. That’s because benefits for “senior citizens” are supposed to rise with the cost of living. However, when there’s no such rise, as measured in ways described below, the benefit does not go up. Or, as the SSA described it reassuringly to me and millions of other elderly citizens last month:
We review Social Security benefits each year to make sure they keep up with the cost of living. The law does not permit an increase in benefits when there is no increase in the cost of living. So your benefit will stay the same in 2016. [Italics added.] There was no increase in the cost of living during the past year based on the Consumer Prince Index (CPI) published by the Department of Labor. The CPI is the Federal government’s official measure used to calculate cost of living increases.
The Consumer Price Index used by the SSA for its periodic Cost of Living Adjustment is the CPI-W. According to Wikipedia, the CPI-W is based on the price of an alleged market basket of products used by an urban wage earner and clerical worker population consisting of clerical workers, sales workers, craft workers, operations and service workers, and laborers. Excluded from this population are professional, managerial and technical workers, the self-employed, short-term workers, the unemployed and retirees and others not in the labor force. Since retirees are excluded, it follows that their increased medical and drug expenses are not factored into the CPI-W. The CPI-W apparently did not go up in 2015.
Bill and I have just spent the past few weeks investigating several well-recommended non-profit retirement communities in our area, where I specifically asked about the estimated increase in monthly fees from year to year — the fees representing a sort of unofficial consumer price index for the elderly who might be considering a move to one of these places. These are the fees which cover the price of one hot meal a day, heat, electricity, basic television, cleaning, plant and grounds maintenance, and the like. At Pennswood, a Quaker retirement community in Newtown, Pennsylvania, I was told it is just under 3% every year, including 2015. At Stonebridge, in Montgomery, New Jersey, it was reported as between 2.6% and 2.7%. At Windrows, in Plainsboro, New Jersey, it was similar. Does it make sense for the SSA, whose beneficiaries are the old and the disabled, to base its Consumer Price Index calculations on putative expenditures by a wholly different population?
Let’s leave that one unanswered for the time being and move on to the SSA’s December message. The truth is that the SSA was jerking us around when it announced that because the cost of living did not go up in 2015 (yeah, yeah), our benefits would “stay the same” in 2016. Yes, gross benefits will remain the same. But as a practical matter, the message is a lie. The gross benefit is reduced by the monthly premium for Medicare Part B (insurance for out-of-hospital medical costs such as doctor visits, outpatient “procedures,” and the like), so that the money which reaches your bank is net of that premium. If you signed up for Medicare Part D, which covers most of the cost of prescription medication, that monthly premium also comes out of the gross. And guess what? The monthly cost of the two premiums together went up between 2015 and 2016. Which lowered the net benefit — the actual amount of money old people get to spend on the “cost of living.”
It didn’t lower it very much — only by $15.60 a month. But the average Social Security monthly benefit is $1.230.00 gross. (Again, I credit Wikipedia for this information.) Take away $209.60 — the 2016 monthly premiums for Part B and Part D together — and only $1.020.40 is left. If I were in that parlous situation, I would rather not pay the additional $15.60 in premiums and have $1,036.00 in income every month, like last year. $15.60 represents at least a couple of thrifty home-cooked dinners.
When Franklin Delano Roosevelt signed the original Social Security Act into law in 1935, the benefits were intended to be only one leg in a three-legged stool, supported on its other two sides by a private pension and by retirement savings. But according to Eduardo Porter, in “An Aging Society Changes the Story on Poverty for Retirees” (New York Times, December, 22, 2015), a recent study by the Government Accountability Office estimated that fewer than one in five retirees among the bottom 20% had any kind of defined benefit pension that pays a guaranteed monthly amount, and fewer than 1 in 10 have any retirement savings at all. Moreover, a typical low-wage retiree can expect to receive only 44% of his or her lifetime wage from Social Security.
That being the case, one could, of course, advise our “average” beneficiary to forgo prescription medication insurance in 2016. But is that really a “luxury” for the old? Are the still relatively healthy young aware of how much it’s going to cost to ride bareback — that is, uninsured — into the wilds of pharmaceutical costs awaiting them when they age, even if they’re among the relatively few who’ve always taken care to eat right, exercise, avoid stress, and be born to genetically lucky parents? Why not advise the pharmaceutical and insurance industries to forgo just a little profit instead?
ON BEING OLD 
Ouch! You hit a hot topic here. In addition to the screwy way they calculate “cost of living” for retirees, there are all sorts of “holes” in the Medicare system. My greatest fear is not outliving my money but getting wiped out by one catastrophic illness. BTW Pennswood is where my husband’s parents lived for many years. After his father died, his mother graduated to units with more care until she was in a “nursing home” situation. The family has a high regard for the facility. They took great care of her however, it is not inexpensive.
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“Not inexpensive” is an understatement when it comes to Pennswood. We thought it was a wonderful facility, but as I am New York, rather than Philadelphia, oriented, it made me feel very far away from everything I know. Also I have intellectual difficulties with seeing the buy-in amount disappear rather than become equity belonging to one’s estate, or against which one could take out a reverse mortgage. So that kind of move probably won’t happen this year. But it seemed wise to find out what’s out there, just in case.
Yes, catastrophic illness is the nightmare for us all. At costly places like Pennswood, the price of the care is built into the very high monthly fees right up front, even if you never need it in the end. I don’t think I can afford to do that, but then I guess I’ve always been something of a gambler and suppose I shall have to go on being one right up to going over the cliff.
As for the “holes” in Medicare — let’s not get started! Plenty of posts there!
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I’m with you. We looked at some senior living places and decided that we weren’t ready for that kind of place. We like a sense of ownership. Maybe a very small ranch home or a condo will be our next move. Can’t get the hubby to budge as he enjoys outdoor work and we both love where we live now. Good luck in your search.
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Thank you. I would guess you and Beloved Husband are about fifteen years younger than we are, so you’ve certainly got some time. We moved to Princeton from Cambridge, and into a condo (where we are now), when we were 75 and 78 respectively — that is, nine and a half years ago. Lucky you to be married to a handy man!
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My husband is 73 and I’m 68 so we are right behind you. I am lucky that he is handy. If he weren’t we’d be in a condo now!
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How wonderful to see you are back, even though this blog
was particularly depressing! M received a Rx recently and
found out the co-pay was now $350! Needless to say, we checked an online Israeli pharmacy and found out the SAME
med was $130. Since profit in the pharmacy industry is the American way, one wonders why that is NOT looked at
in that inflation index!! HAPPY NEW YEAR?????
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Thank you, dear Rita. I have forced myself to come back after doing too much brooding about crossing that bright line, next July, that is generally agreed to divide the merely “old” from the “old old”and what that might mean in terms of the limits on the life one can lead. So some of that may begin to dribble into the blog posts, since one can’t be a complete ostrich forever. However, yes I will try to remain “back.”
As for your question about the COLA (Cost of Living Index), that was exactly my point. Actually, if M. is down to social security, without additional income, and you’re still not married (so they can’t look at your resources when considering his), there are charitable organizations which may cover the cost of onerous copays. One name that comes to mind is “Caring Voice.” I’m not sure how you contact them, but M’s doctor may be able to help. The idea of “charity” is repellent after a lifetime of work and paying into the system, but if that’s all there is right now, go for it!
Yes, “Happy New Year!” Better as happy as possible than determining to be unhappy!
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So glad to see you back, Nina.
Australia too has the same problems for the elderly. It is the price that extreme capitalism extorts from its citizens. A low taxation regime combined with a race to individual successes, with everyone for themselves to become a winner, we pay the price.
We also get a pension which is about 30% of average earnings. In our case, fortunately having worked (and paid tax) in both Holland and Finland we get a top up with small pensions from both these countries as well as the meagre Australian pension.
My parents when retired, returned to Holland where the basic pension is about 75% of average earnings. In Holland everybody, rich or poor, gets this basic pension.
In Australia the pension is ‘means tested’. Which means that assets and savings including the value of your furniture, car , jewellery etc. gets taken into account when the pension is calculated.’
But, in Holland the taxation on earnings is over 50% while here, where Governments are forever demonising taxation, it is roughly 30%.
So, at the end of our lives, when worrying over money ought to absent as a reward for having lived a good and just life, the countries with low social consciences (low level of paying towards societal goodies s a pensions, good health care) we might end up living of salvation army soup or worse, go hungry and wanting.
Gee, this is a rather gloomy post, but mentioning social security is a red flag to this curmudgeon.
I am so glad to see you back. I missed your words, and you.
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That is both very sweet, Gerard (the part about missing me and my posts), and very sad. The United States is not a good place to be, economically speaking, unless one is among the wealthy, or trending in that direction. Trending the other way (there really is no middle ground any more) is frightening, and becoming more so with every election, especially after Citizens United (the Supreme Court decision that held corporations were people, and could therefore spend as many millions as they liked buying candidates, buying media, trying to buy our minds). But your description of “means tested” societal support in Australia (where even your car and furniture count in calculating pension benefits) sounds even worse. Salvation Army soup? I hope not. I tried your salmon baked in milk recipe and didn’t like it, but by golly I want you to be able to go on making it for as long as it pleases you.
As for gloomy posts — well, getting old is rather gloomy, to be honest about it. There are bright spots, but I’d trade them in a heartbeat — together with the alleged wisdom that comes with the years — for the romantic “miseries” of youth!
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It was really painful to read this post, though I’m glad you shared the situation with us. I know so very little about the mechanics of life in the US. And I am sure there are people who feel economic pressure in our age here in my country as well. But it seems to me that a person who has worked all his adult life, should be guaranteed a more comfortable existence in old age. I suppose I was very luck in that professional conditions and business in my younger years protected me from the dependence on that sort of ‘social security’. But it does seem to me unfair, when I consider that much of the society of today was built on the foundations provided by our generation. And there should be some sort of responsibility on the part of the society at large to those who contributed when they could, and can’t anymore. Sending you my fond best wishes for a very happy new year. And yes, very happy to hear from you again.
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I didn’t think the post would mean much to anyone not living in the United States. But apparently there is some residual illusion abroad that we live in an economic fairyland. Quite the opposite is true. So perhaps there is some value in showing how every day, in every way, the rich are tilting everything a little bit, plus a little bit, plus a little bit more, their way. And what you say about it, Shimon, beginning with “it does seem to me unfair” is also true. Thank you for the fond best wishes. Fond best wishes right back.
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Very astute observations and I had been ruminating about same just this morning, so we were on the same track! (Though your extensive commentary went well beyond my mini-musings!) Coupled with the news in last week’s NYT about the growing inequality gap, and the ways that the super-duper rich (multi-billionaires) enable tax codes to be written to avoid paying their fair share on their gluttonous incomes, well, it should give us all pause.
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Thank you, Kathy. So you noticed, too! “Giving us all pause” though? Yes, sure. But then what do we do after the pause?
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Welcome back, Nina. Such an enlightening post. My husband has just started receiving Social Security. We also have gotten to see how much is in our account over the years. It seems that they count on the fact that most of us will not survive long enough to collect all that we contributed over the decades. Of course, we have long been told that SS would not survive into the baby boomer retirement years. But, it’s still there. Interesting.
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Thanks for the welcome back, Van.
Actually, you can find out everything about SS I’ve set down here, and more, online, so I don’t know how “enlightening” I’ve been. But it’s not true that, as you seem to believe, your SS “account” is like a bank account that you lose if you die before emptying it. First of all, you don’t stop receiving benefits when the total you’ve received exceeds what you paid in. The amount you paid in, and for how long (you have to have worked and paid in for a minimum of forty non-consecutive quarters), determines the amount of your monthly benefit, up to a certain cap, but not how long you will receive it. Moreover, a widow (or widower), who may never have done paid work, will receive the dead spouse’s benefits until the survivor’s own death.
This apparent inequity between pay-in and pay-out is particularly true for those of us who began to pay in a long time ago. My first job from which SS withholding was taken was in 1948 (a summer job), and the cap on the earned amount from which SS withholding could be taken was then, and for many years to come, only $3,000 a year. (Now it’s $118,000 and climbing.) So it’s entirely possible that if I’m lucky enough to live a while longer, I may have received more in benefits than I paid in by the time I die. But there are people paying in now who may die before collecting or before collecting everything they’ve contributed; their payments will fund benefits for those who come later.
As for SS surviving, or not surviving, don’t believe anything you hear on Fox News! 🙂
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Ha…on the Fox News. I remember hearing folks talk about this during the 70’s. And I’m with you on the many years of contributions…mine started at age 16. I’ll be able to file late in 2016. $$$ ca ching ??? ☺
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Nina, nice to hear news from you. Even though it’s a downer post! The breakdown of cost of living was an in-depth eye-opener. Your inquiry into retirement facilities reminded me of the expense ladder. As an NP when I cared for the elderly in facilities, it was always a struggle to get the families to pay for a higher level of care (needed). Within five years I’ll be making age-required adjustments in living, I’m putting it off as long as I can! But the thought is always hovering! Hoping 2016 brings some brightness for you. And you write more posts, any kind will do. Missed you! Chryssa
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Thanks for the warm welcome back, Chryssa. But a “downer” post? More like a clear-eyed glance at one small aspect of what is really happening to the shrinking middle class, the poor, the elderly and the disabled in our so-called land of the free and home of the brave in the twenty-first century. The truth is that unless you’re in that fabled one percent we all keep reading about, you’re not so free. And you certainly have to be brave to navigate your personal way through the tsunami of public economic problems which seem to be coming. I too hope 2016 is bright — not just for me but for you. Although from my point of view, not being dead or in the throes of some horrible disease or in pain is bright enough when you’re going on 85! Fingers crossed it stays that way for a while….. 😉
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Agree completely! Not part of the 1%, I feel the bite. I’m concerned about the economy! At least I’m helped along with a modest retirement fund from a healthcare system. Still waiting for 2016 to brighten up. Family & friends dealing with serious illnesses. Pause to reflect what hovers with age. But let’s not go there! Live for today! 2016 will get brighter! Chryssa
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It’s the old “Golden Rule” Nina. Those who have the gold make the rules. 😦
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That’s really funny, Ernesto. I never heard it before. It’s going right into my repertoire of ready one-liners! Thanks!
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