How we like to jump on assumptions because they reinforce our presumptions

Read the following excerpt from a news story. Then ask yourself. Why are older Americans struggling financially because of COVID-19? (🔴) If there is paltry inflation, why would the COLA be any higher? What makes people take more out of savings? I’m guessing it is spending.

Older Americans already struggling financially amid the COVID-19 pandemic probably won’t find much solace in their Social Security checks next year.

The 68 million people – including retirees, as well as disabled people and others – who rely on Social Security are likely (actually confirmed) to receive a 1.3% cost-of-living adjustment next year because of paltry inflation, according to an estimate by the Senior Citizens League, an advocacy group. For the average retiree who got a check of $1,517 this year, that would mean an additional $19.70 a month.

“It makes people have to take more out of savings,” says Mary Johnson, a policy analyst for the Senior Citizen League who releases an estimate ahead of next month’s official government figure. “Other people who don’t have savings will go into debt. Many may go into poverty.”

https://www.usatoday.com/story/money/2020/09/15/social-security-benefits-checks-could-rise-1-3-next-year/5798699002/?for-guid=fc581102-3b74-4cd1-8565-3568488453c9&utm_source=usatoday-Retirement&utm_medium=email&utm_campaign=baseline&utm_term=hero

IT as mentioned above is presumably the low Social Security COLA, but that has nothing to do with the pandemic. In the vast majority of situations, seniors are not struggling financially as a result of COVID.

THERE IS A LESSON IN ALL THIS a lesson repeated over and over and which mostly goes unheeded by younger Americans. Unless you want to greatly change your lifestyle, you cannot, nor was it ever intended to live in retirement on Social Security alone.

(🔴) The fact is older Americans are mostly not struggling financially from the pandemic (except some of those still working and needing that income in retirement.)

7 comments

  1. You ask: “Why are older Americans struggling financially because of COVID-19?” The material you quote doesn’t actually say it’s “because of” the pandemic. It says “amid” the pandemic.

    “If there is paltry inflation, why would the COLA be any higher?” So people on Social Security will have more to spend, of course. (Are you offended by the name “COLA”?)

    “What makes people take more out of savings?” For instance, a working retiree in a restaurant whose employer went broke might need to replace some of his former salary.

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    1. The generalized “older Americans” amid the pandemic clearly is making a link so that’s nit picking. The COLA reflects the rate of inflation so paltry inflation leads to a paltry COLA. I suspect everyone would like more to spend would they not? Many young Americans need more than seniors. You will note I clearly acknowledged the exception for the person who lost a job and counted on the income. But in the context of a low COLA and paltry inflation, that does not force seniors to take more from savings, it’s a wash, especially in view of reduced spending.

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    2. The generalized “older Americans” amid the pandemic clearly is making a link so that’s nit picking. The COLA reflects the rate of inflation so paltry inflation leads to a paltry COLA. I suspect everyone would like more to spend would they not? Many young Americans need more than seniors. I acknowledged the exception for those who lost a job and needed income.

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  2. Unfortunately Dick, as you know there are folks who lost their pensions when companies went belly up or sold out to foreign companies that did not pick up the liability. Others have pensions that are tied to SS where if SS goes up their pension goes down. We were fortunate or smart enough to get into a company that has survived and maintained their pension. In some of the communities we have lived in, there are people who supplement their SS with food pantries to get by. These are the people, who are good people, that changed my thoughts on retirement plans which I always thought were guaranteed. These are the folks that really need a boost.

    Have a Happy Thanksgiving.

    Make a positive difference in someone’s life today! Bill Mitchell

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    1. The number of people even with a pension is small and never was even half of workers. The relatively few workers whose companies failed to fund those pensioned have been covered by federal insurance since 1975 and that coverage benefits the lower paid the most. You have to look at the total picture, including assets and you have to factor in all programs that support the lowest income. The fact is for decades the number of retirees living in poverty has declined sharply while the number of children in poverty has increased.

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  3. Here’s the two items that are all you need to know:

    – Another article by Mary Johnson, over a year ago – same topic. https://seniorsleague.org/senior-cpi-would-provide-more-adequate-social-security-cola-next-year/ She says “… The CPI-E tends to grow about 0.25 percentage point more quickly than the CPI-W on average … Those are not big differences, but like interest, compound over time. For anyone depending on Social Security for half of their income or more, every dollar makes a difference — and adding up over time may be enough to buy an extra week’s worth of groceries. …”

    – Poverty in America: https://www.census.gov/data/tables/time-series/demo/income-poverty/historical-poverty-people.html
    – Children, under age 18: 27.3% (1959), 14.4% (2019), 18% (2016) – 20% decline in three years!
    – Adults ages 18 – 64: 17.0% (1959), 9.4% (2019), 11.6% (2016) – 23% decline in three years!
    – Seniors, ages 65+: 35.2% (1959), 8.9% (2019), 9.3% (2016) – 4.5% decline in three years (for a financial status that took, on average, 70+ years to create!

    So, I think Trump is a jerk, didn’t vote for him either time (didn’t vote for Clinton or Biden either, who are even dirtier when it comes to politics and “real” life – see how they cashed in while in office and after, compared to say Gerald Ford, Jimmy Carter, George H. W. Bush, even Ronald Reagan).

    However, while everyone did better when it comes to poverty over the past three years, it is the seniors who survive (that’s a big if) who are LEAST impacted by COVID. Here’s one more data item for your information – Medicare cost sharing – https://www.ssa.gov/policy/docs/statcomps/supplement/2011/2b-2c.html#table2.c1
    Medicare Part A:
    Per Admit Deductible: 1983: $304; 2021: $1484, Average increase/year 4.26%
    Days 61 – 90 Copay: 1983: $76; 2021: $371, Average increase/year 4.26%
    Days 90+ Reserve: 1983: $152; 2021: $742, Average increase/year: 4.26%
    Skilled Nursing Copay/Day: 1983: $38; 2021: 185.50, Average increase / year 4.26%

    Medicare Part B:
    Premium: 1983: $12.20 2021: $148.50 Average increase / year: 7.4%
    Deductible: 1983: $75 2021: $203 Average increase / year: 2.66%

    There was no Medicare Part D in 1983, Rx premiums and copayments/coinsurance are very modest, only a small fraction of the costs retirees once paid, and a much, much smaller percentage of the Rx costs others pay. Thank you George W. Bush – your vote buying got you elected and only added another $10+ Trillion in unfunded promises which will add to our national debt.

    So, a large part of the decline in poverty among seniors has been Congress’ decision to insulate them from medical expenses – and by capping what the government will reimburse (RBRVS, DRG, etc.), shifting the cost to you (either in terms of the prices you pay for medical services and Rx or your tax burden, or both).

    Just wait until the 2020 numbers come out and you will see (if their are truthful, however, I suspect the Biden Administration will want to cook the books to justify more vote buying among seniors in 2022, 2024).

    Instead, Ms. Johnson wants you workers to pony up (raise taxes, in addition to tax increases necessary because the SS trust fund is projected to be depleted by 2034, Medicare Hospital Insurance trust fund by 2026) . This enables “bad” behavior (if retirement is a priority) – so seniors who didn’t choose an employer that offered a retirement savings plan or pension plan, or who didn’t save in their retirement savings plan or IRA over the past 39 years could buy another weeks worth of groceries ten, fifteen, twenty years from now.

    Get your wallets out, suckers. Do your wages automatically increase by CPI-U or CPI – E?

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  4. I don’t understand these stories. As a retiree, my income has not changed so I do not have less money now than before the pandemic. My expenses have shift to other things, mostly online purchases because we cannot freely travel, go out to the theater, or to restaurants. I even had some medical and dental appointments delayed for several months by the governor’s executive orders. I actually saved money from the lack of haircuts for 4 months too. But my spending did not increase past my income.

    Did these retirees lose part time jobs? Then were they truly retired? These retirees may be in trouble but I fail to see how the pandemic is to blame. These complaints started within the first few months of the shutdowns.

    What will be a valid complaint is when this pandemic is over. There will be tax increases to pay for the government spending and to make up for the lack of tax collection that the government caused from shutting everything down. In New Jersey, I am expecting crippling property tax increases a year after we get back to “normal”. Then everybody, not just seniors will be hurting but seniors will have limited ability to find the extra income to pay their taxes.

    The story I am expecting to see now is how hospitality workers have permanently lost their jobs and their homes for being out of work going onto 9 months. Even if they had a good emergency fund and unemployment checks, it is pushing the limits of what you can expect a young family to endure without negative effects. When the “health emergencies” declarations end, 90 days later you will hear the screaming about all the forbearance coming due and people losing their houses because they thought they won’t have to pay their mortgages or rent.

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