Generally speaking, since Social Security’s inception in 1939, as inflation has risen, the checks received by American retirees have grown with modest increases to help keep pace. However, with the national debt reaching its ceiling in mid-May of this year and belts tightening all over Capitol Hill, new deficit reduction strategies may have those “raises” leaving a lot to be desired.
Lawmakers are considering a change to the manner in which inflation is calculated, opting to tie it to the “chained consumer price index.” The result? A measurement that would undoubtedly leave inflation appearing slower than the current metric which, in turn, would result in smaller increases for seniors.1
“Seniors cannot afford this,” says Mary Johnson, a senior policy analyst at The Senior Citizens League, a non-profit seniors rights advocate organization. “This would negatively impact not just seniors, but also many families that end up helping out these seniors financially.”
Roughly 60% of the nation’s seniors rely on Social Security for at least half of their income in retirement. To these individuals, any reduction in raises to offset inflation is noteworthy. If the new calculation method was to pass, the average retiree would see roughly $18,000 less in benefits over a typical 25 years benefit span. After just 10 years under this new system, a 73-year old could expect benefits roughly 3% less than if calculated under the “old system.”2
What does all of this really mean? First, it’s further evidence that the “road to financial recovery” for the U.S. government (and many of her tax-paying citizens and seniors) will be a long one. Such proposed debt reduction measures by Congress might take decades to have any noticeable effect on our overall deficit. More importantly for many approaching or currently enjoying retirement is the reality that preparation for financial certainty in retirement is a burden one must carry for him or herself. Virtually obsolete are the days of the traditional company pension. Uncertain at best is the future of Social Security – a leg of retirement income many have planned to rely upon.
The good news buried amidst all of this? While little on Wall Street or Capitol Hill or the nightly news may seem stable, your financial future still can be more stable. While Congress contemplates measures to reduce raises to offset inflation, you can still leverage financial solutions (including fixed or fixed index annuities as part of a well-rounded financial approach) which not only help protect every dime of principal and guarantee* income you can’t outlive but offer opportunities for raises in retirement income as well.
Whether you’re planning to rely heavily on Social Security in retirement or simply use it to augment other primary income sources, the fact remains – you need a sound retirement income strategy. The best time to find out if you’re on the right path? Right now. If you’d like to receive a complimentary Retirement Income Analysis, simply contact our office today! Your financial future is far too important to leave to chance – let us help you get where you’d like to go!
1 “As the Federal Government Hits Its Debt Limit, Lawmakers Spar Over Solution.” New York Times.
May 16, 2011.
2 “Coming Soon: Smaller Raises for Seniors?” Smart Money. July 15, 2011.
*Guarantees subject to the financial strength and claims paying ability of the issuing insurer.