Retirees and the Chained CPI Index
Summary: The chained Consumer Price Index calculation typically provides an indirect cost-of-living estimation that is 0.4 percent per year less than the current method that uses an actual cost of goods estimation method. If the chained method becomes part of the new budget, the typical retiree will lose about $60 per year in Social Security benefit increases, or $600 over a 10-year period. Other government pensioners such as military retirees will likely see similar cuts. This article assumes that the new way to calculate cost-of-living increases will become law. It also shows you how to make slight shifts in your household budget to accommodate the decreased benefits. If you are nearing retirement, this article is also for you. If you have loved ones such as parents or grandparents who depend on Social Security, you will learn how to help them budget for their slightly lower incomes.
The news media, those who circulate emails, and organized internet petitioners are mostly in agreement: They are against the proposed changes to the way in which Social Security cost-of-living calculations are likely to become law soon. Their fears are not well-founded. The changes will be small and they can be overcome.
The typical retiree receives about $1,200 per month in Social Security benefits. If the cost of living were to increase by 2.0 percent under the present method, the average dollar increase would be $24. With the chained method the increase would likely be 1.6 percent, or $19.20. The difference: $4.80. That amount could be recovered by foregoing a glass of wine, or one short trip by car, a sandwich, or one trip to Starbucks. Other ways to maintain your prior standard of living might be to economize with utilities, turn off lights when not in use; or to substitute store brands for name brands when shopping; to walk when possible instead of riding. Improve your gas mileage by maintaining proper air pressure in your tires; get the junk out of the trunk.
If there is one thing I know about seniors (yes, I am one) it’s that we are a kindly bunch. Many of us sacrificed in WWII, or Korea, or Vietnam, at home or in the thick of battle. “We did it before, and we can do it again” was a popular song during WWII. So there is nothing new in any of the preceding actions.
But neither seniors nor others are stupid. Shifting the burden to pay for wars onto the backs of those who also fight them is a double whammy. Getting us into wars on false grounds is a third whammy. And profiting from those same wars is a fourth whammy. Denying the disabled, the sick, and children are whammies that are unconscionable. Glossing over all these whammies is pushing the whammy envelope too far. Seniors also vote in big numbers and in high percentages.
Ron