Small Social Security COLA this time

12 years ago

I just saw in the newspaper, Social Security recipients should expect a very small cost of living increase this December, to be reflected in their January 2014 checks. About one to one and a half percent only. There were no increases in 2010 and 2011 and only 1 point seven percent last time. Sorry to be the bearer of bad news. I'm hoping nobody gets upset and says this belongs in hot topics. I'm not expressing any political view, just reporting a bit of news. My hubby gets Social Security.

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Comments (11)

LuAnn_in_PA
12 years ago
At least SS recipients are getting a COLA... millions and millions of people do not.
susanjf_gw
12 years ago
it's scarey to think of living on half what we do now...trying very hard to pay off the mortgage...

btw a local place is trying to pay employees $15 an hour...(don't know what type food they serve) wonder if they'll do it?
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Your SS benefits are not based on the last year you worked. It looks at your highest paid 35 years over your entire working career. It goes something like this: The calculation will be made over 35 years which is 420 months. First, your record is searched for 35 highest paid years. If you do have that many, then there will be some years counted as zero years. Next, the older years are indexed to sort of bring them up to todays dollars. The factors used is something like a cost-of-living adjustment, but in my humble opinion, the adjustment falls short of the actual inflation rate. However, the same index is applied to everybody be they rich or poor. For example, if you earned $100 30 years ago, the adjustment factor might be 4.5, so your $100 income made 30 years ago would be adjusted to 4.5 x 100 or $450 in current dollars. This is done for each year using a different factor for each year. If there are zero years, these are included also. The 35 highest paid years are used or all the years if there is less than 35. All of the adjusted years are totaled and then divided by 420, the number of months in 35 years. This becomes the average monthly income figure that is used to determine your benefit. Clear as mud? I hope it is a little better than that. Go to the social security site to find this information. The indexing list should be there and it may change some for each passing year. The formula for using the average indexed monthly taxed earnings for computing the benefit should be there.
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Go see your Social Security Office. You'll should call and make and appointment first. As other posters have said, the rules are many. If you have also worked and paid social security taxes, that will be considered. Basically, the amount you might get is computed in several ways and then the maximum benefit one is used. The various cases may be (1) your wages and lifetime contribution alone, ( 2) 50% of your spouce's amount, or (3) if disabled, the disabled amount. If you were born after a certain date, the full retirement age is increased above 65. At one time, the full retirement age was to increase in steps from 65 to 67. I have been retired long enough to have lost track of the current rules. If you are elgible at age 65 for full retirement, you can take early retirement (as early as 62) with a reduction in payments. The reduction is based on the average life expectancy. When I retired, life expectancy was age 77, e.g., half of your population group will have expired by age 77. The reduction works out to be 5/9 percent per month early, thus if you retire 3 years early, the reduction is (36 months x .05)/9 or 0.20 which is 20%. Is this bad? It depends on how long you will live. If you do not expect to live beyond 77, then early retirement is not a loss. You loose only if you live beyond 77. Here's why. If you retired at the normal age of 65, then the time span to 77 is 12 years; if retired at age 62, the time span to 77 is 15 years. Check it out. You'll find that the total money paid out over the longer time is exactly the same as that of the shorter span. For example, suppose the normal payout was $100 per month. The amount for 12 years is 12 x 12 x 100 = 14,400. Now suppose that you retired 3 years early. The payout is $80 per month. The amount for 15 years is 15 x 12 x 80 = 14,400. After age 77, the early payout plan is less than the other and the difference increases each year. Since I retired, life expectancy may have increased to 78 years. These calculations give amounts based on the current value of the dollar. As time goes by, there are COLA increases that will increase the payout to offset inflation to some degree. In my experience, the SS cost increase numbers do not fully cover the real inflation of the basics.
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I think Social Security will be bankrupt pretty soon. As Rosemary pointed out, most people are collecting far more than they ever put in and it can't be sustained. But you also can't shut people off because for a vast majority of seniors, it's their only income. I suspect there will be reform in the future. Not because the government actually cares about grandma and grandpa but because there's a huge portion of the electoral base who will be pretty angry if they lose their benefits or are told there's nothing left. THAT will be the only thing that dictates a change - fear of losing an election. As a disclosure I'll say I'm not talking about anyone in this thread and I'm not angry at people who receive SS. It's the plan and it's unfairness that bothers me. Just general annoyance at having money stolen from me every paycheck under the promise that it will support me in 40 years when I need it. Yeah right. And yes, I do consider it stealing because it's mandatory and there is NO guarantee that it will be available when you're due to collect. The irony is that if it were a private company running this instead of the government, I don't think it would be legal! Imagine the electric company deciding to collect $100 extra from everyone every month. This is a mandatory charge but they say that in another 20 years, you will never have to pay another electric bill. However, there's small print saying that you will only get free electric if there is any money left to cover it, and if the money is gone, you will have to keep paying for your own electric and all of the previous tens of thousands that was collected from you will not be returned. Can you say lawsuit? lol
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chisue, FICA tax was designed to pay for social security benefits and it's been overcharging for that purpose since it started. Also, remember that self employed people (as I was) pay double the amount, currently 15.2%. It's a heavy tax and more isn't needed. alisande, economically it's a free country. There's a (maybe inadequate) safety net for those who falter or fare less well than others, but isn't each individual alone responsible for their lot in life and to take care of themselves and any others they support? I won't go along with any Robin Hood sentiment, those who obey the law and work hard to do well are entitled to their rewards. Those who don't strive and try anything possible to improve their own financial adequacy or well-being will do poorly and are entitled to those consequences too. There should be far more programs to help people redirect their lives and learn market-demanded job skills but beyond that, hmmm.
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fran1523
12 years ago
The year or two before last we didn't get any COLA increase in social security. You can't live on it but its a nice dependable amount that needs to be supplemented with retirement accounts or savings.
wanda_va
12 years ago
Actually, I'm surprised that there will be a COLA. It's not large, but it's a help. The same amount applies to federal retirees.
linda_in_iowa
12 years ago
I am also surprised there will be a COLA. The cost of living hasn't gone up much. My State of California pension has a COLA with it that is based on the cost of living in CA. That is really sweet when a retiree lives in another state with a lower cost of living. One of my former coworkers lives in Costa Rica.
Elmer J Fudd
12 years ago
I think the social security adjustments are based on nationwide stats, which in a way is fair and in a way isn't. People in the less dynamic parts of the country (from an economic activity standpoint) shouldn't get cost adjustments for changes in boom areas that don't affect them, and similarly people in more expensive areas shouldn't have their increases reduced because of other areas where costs are lower and more stable.

Linda, I think it's great that you're happy and taking advantage of living in Iowa. But I think you'll agree that you're very unlikely to see a steady stream of California exiles moving into you neighborhood.

Signed,
A native Californian who isn't leaving
sheilajoyce_gw
12 years ago
And while we are talking about Social Security, I hope all of you have reviewed your applications for any increases you might get from your spouse's SS claims. I taught, and so I did not contribute to Social Security but to the teachers retirement system instead. However, I did have a few short term jobs before I was a teacher that contributed to Social Security, and I qualified for a small monthly check when I applied.

A few years later, my husband applied for his Social Security, and he had contributed to Social Security since he was 13 or so. At that point, I qualified for half of his monthly payment in addition to his payment, and so I re-applied. My measly amount increased immediately to a few hundred dollars more each month.
carol_in_california
12 years ago
A small increase is better than being hit in the head with a stick.
chisue
12 years ago
At the time my DH and I both took Social Security benefits it seemed like a smart move. We could make more investing the money than waiting to take the benefits. Well...right now, of course, it would be a dumb move! Where can you invest safely today and make as much as 8%?
Elmer J Fudd
12 years ago
chisue, take another look at how Social Security benefit amounts work, it's not how you say.

As an example, just to keep the numbers simple, let's say a person qualifies at age 62 and starts then. They get 75% of the amount they'd get at 66.

Real numbers, let's say it's $7500 at year at 62 and it would have been $10000 at 66. By waiting, they're getting a higher amount, yes, but that's not "a return on their investment". What they passed up getting was $7500 per year for 4 years = $30,000. It takes a lot of years with that $2500 increase (which will get cost of living adjustments) to equal the $30000 they passed up. If you factor in interest cost, for someone who isn't working, unless they feel confident to live to a ripe old age, taking it sooner can be better. See what I mean?
chisue
12 years ago
Snidely -- Oh, duh. I forgot about the "bird in the hand" from the benefits received sooner! Thanks!

I was thinking only of the difference between 'making' only one percent now on the taken funds vs. receiving a higher percentage had we had waited and let the SS benefits increase.

Now...where did I PUT that $30K... LOL

Small Social Security COLA this time

Comments (11)

LuAnn_in_PA

susanjf_gw

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