No Social Security Increase

The Social Security Administration announced that there would be no annual cost-of-living adjustment (COLA) this year for Social Security recipients because there isn’t any inflation, at least not as calculated by the SSA formula. This is widely presented as a hardship for seniors. As the USA Today put it, “Though prices on paper may have dropped, the cost of living for Social Security beneficiaries is rising, and their quality of life is falling. Social Security recipients have lost nearly a fourth of their buying power over the past 15 years, according to the Senior Citizens League.”

While the formula used to calculate inflation is somewhat arbitrary, it is equally true that the Senior Citizens League is a special interest group whose purpose it is to promote the plight of seniors. Setting these issues aside, I want to make 3 points:

  1. None of the reports I have heard in the mainstream media have mentioned that Social Security is on a trajectory toward insolvency by 2035. Needless to say, raising benefit levels would simply hasten this reality. Recipients can only get an increase if someone else pays for it.
  2. All of the reports assume that Social Security is the sole source of retirement income. Sadly this is true for many, but it was never intended to serve that purpose. Some of you might be thinking that those who rely completely on Social Security simply could not afford to save more prior to retirement. In general, this is not true; saving for retirement is a matter of priority. But if this is the case in some instances, it only underscores the reality that Social Security doesn’t deliver much in return for 12.4% of income during one’s working years.
  3. Completely absent from all of the reports I’ve heard is a major driver of stagnating incomes for seniors. The Fed’s artificially low interest rates have all but destroyed returns on fixed income, leaving seniors with the a choice: Accept a guaranteed return below the inflation rate or invest in stocks and bonds, a risky option for anyone with a modest nest egg. Put another way, our government has robbed seniors of an opportunity to obtain a reasonable, safe, market rate of return for retirees with funds that supplement Social Security. This has been done to stimulate investment and keep the economy going, but its collateral damage has not gone unnoticed. Anyone interested in “helping seniors” should propose an end to the Fed’s near zero rate policy.

Social Security is in distress and its time we take radical steps to fix it, including privatization and opt-out options. Anyone who complains about the lack of a COLA this year should step back and look at the big picture. It’s only going to get worse.

3 thoughts on “No Social Security Increase

  1. It’s a shame that some seniors struggle so much after paying into the system for so long, but the interest rate problem is a crime. It’s costing anyone with a 401k a lot of money when they retire.

  2. Workers paid into this system and employers matched it. It isn’t welfare. The government borrowed all the money in the trust fund. When it flipped a few years back and outgo began to exceed income, it meant the government can’t borrow anymore and actually has to fund the shortage from general revenues. The trust fund should have been off limits to the government and put under proper management. It’s too late for that now. It will not be privatized or shut down. There are a lot of seniors who vote.

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