Got any relatives or friends who are freaking out about Social Security? Send them this short and informative video titled…you guessed it: “Stop Freaking Out About Social Security” from At What Cost, Bloomberg’s Facebook Live Show.

According to a new estimate based on the recent Social Security Trustees report, the Cost of Living Adjustment (COLA) for 2020 will be a scant 1.2%. That’s an increase of about $17.50 in monthly benefits for the average claimant. The same projection says that the Medicare Part B premium will likely rise by $8.80 per month next year. If both estimates prove accurate, the average beneficiary will only receive a net increase of $8.70 per month, which doesn’t buy much these days. As Bernice Napach reports in ThinkAdvisor:

“For recipients collecting $735 or less in benefits, the Medicare Part B premium increase would wipe out their entire COLA. They would have no additional funds to pay for rising costs for health care, housing or other necessities, which is an issue for a growing number of retirees.” – ThinkAdvisor, 5/1/19

If the 2020 COLA is, in fact, 1.2%, it would be the smallest benefit increase since 2017. (At 2.8%, the 2019 COLA was one of the highest of the past ten years.) For three of those years, the COLA was zero.

Of course, the COLA is supposed to cover the cost of inflation from year to year. But under the current formula, the CPI-W (or Consumer Price Index for Wage earners), it usually doesn’t. That’s because the CPI-W does not accurately reflect the inflation rate for the goods and services that seniors spend money on. For example, seniors spend roughly twice as much on medical care as younger adults, but the CPI-W does not take that into consideration. On the other hand, retirees don’t drive as much as working-age people, but the CPI-W fluctuates with the cost of gasoline. If the price at the pump falls, so do seniors’ COLAs.

The National Committee believes it’s time to adopt a better formula for calculating cost-of-living adjustments for retirees: the CPI-E, or Consumer Price Index for the Elderly. The CPI-E is based on retirees’ actual spending habits rather than those of the general population. Costs like food and transportation are de-emphasized, while inflation in housing and medical costs is given greater weight.

Three pieces of legislation have been introduced in the 116th Congress that would implement the CPI-E for calculating Social Security COLAs:

Social Security 2100 Act (Rep. John Larson)
Social Security Expansion Act (Sen. Bernie Sanders)
CPI-E Act (Rep. John Garamendi)

A 2019 study released by the federal General Accounting Office (GAO) found that if COLAs had been based on the CPI-E during the years 2003–2033, by the end of that 30-year period a beneficiary who earned the average national wage would receive $100 (or more) in additional monthly benefits. An extra $100 doesn’t sound like a lot, but think of the expenses it could help cover for seniors living on fixed incomes, including:

• Utility bills
• Insurance premiums
• Medical co-pays
• Health aides
• Telephone and internet service
• Groceries

A more accurate COLA formula would increasingly benefit retirees over time: the larger the benefit this year, the higher it will be the next year when the percentage increase in the COLA is applied. (This is known as a ‘compounding effect.’) Conversely, inadequate cost-of-living adjustments – especially when offset by increases in Medicare premiums – erode seniors’ buying power over time. There is no question: the CPI-E represents a superior alternative for seniors, especially the 50% of retirees who depend on Social Security for all or most of their income.

Cross-posted from: National Committee to Preserve Social Security and Medicare

This Mother’s Day, let’s celebrate the remarkable Mothers of Social Security. Without them, this essential program may never have been born. It certainly would be much less successful and effective.

The Mothers of Social Security pushed for an expansive, ambitious program. When necessary, they fiercely resisted men too cautious to embrace their bold vision. All of us benefit immensely from their work—particularly women, for whom Social Security’s modest benefits are especially important.

Best known of Social Security’s many mothers is Frances Perkins, the first female member of a presidential Cabinet in the history of the country. When President Franklin D. Roosevelt first asked Perkins to become Secretary of Labor, she told him that she would only accept his history-making offer if he agreed to fully support her fight for Social Security, as well as other significant measures to increase all of our economic security. He did. True to her principles and values, she was a driving force behind the healthy start of Social Security, from the system’s conception to its birth and its early growth.

A less-known pathbreaker was Dr. Barbara Nachtrieb Armstrong, the first tenured female law professor in the country. A Ph.D. economist, she taught both law and economics at Berkeley and authored a landmark treatise, Insuring the Essentials, an exhaustive study of social insurance and minimum wage programs around the world.

Armstrong chaired the Roosevelt administration working group that invented Social Security. Other policymakers, concerned about the constitutionality of Social Security, argued that it should be a state-based program. Armstrong successfully convinced them that only a federal program was workable. When those who oversaw her work contemplated dropping Social Security because they feared it was too big a lift, she leaked their plan to friendly journalists whose exposés got Social Security back on track.

Without Armstrong’s bold leadership and keen intellect, Social Security might not even exist at all today. If that sounds hyperbolic, those same policymakers whom Armstrong outwitted later decided to not propose national, guaranteed health insurance. Cautiously, they decided it was better left for the future. Today, we are still fighting for improved and expanded Medicare for All.

There’s more! Read the rest at Common Dreams »

It is one of the most important retirement documents you will ever receive – but fewer Americans are reviewing their Social Security benefit statement nowadays due to cost-cutting and a government push to online services that is falling short.

Until about a decade ago, all workers eligible for Social Security received a paper statement in the mail that provided useful projections of their benefits at various ages, along with reminders on the availability of disability benefits and Medicare enrollment information.

But the Social Security Administration (SSA) decided in 2010 to save money by eliminating most mailings of benefit statements. Instead, we would all be encouraged to obtain this information online.

It is now abundantly clear that this is not working out.

The number of workers accessing their statements online has been just a fraction of those who once were reached by paper statements. And the cost-benefit tradeoff is poor.

Forty-two million Americans have created online accounts with the SSA since they were first offered seven years ago, the agency says, compared with the 155 million paper statements that were mailed in 2010, before the cost-cutting began. Meanwhile, the number of online account-holders who accessed their statements fell dramatically in fiscal 2018, from 96 percent to 43 percent, according to a report issued in February by the SSA’s Office of the Inspector General (OIG).

The report does not speculate on reasons for the fall-off, and the SSA declined to offer its own analysis. “We’ll leave the hypothesizing to others,” said Mark Hinkle, acting press officer.

If you have an online account with the SSA, you will receive an email message three months before your birthday reminding you to review your statement. But the process of logging on can be challenging, partly due to security protections aimed at preventing identity theft and fraud. The security is necessary, but the setup process requires users to go through multiple layers of authentication to prove identity.

Meanwhile, the level of comfort with online technology among older people lags the general population, according to a 2017 study by the Pew Research Center. For example, 51 percent of adults aged 65 or older have home broadband, compared with 73 percent of all adults. “We’ve seen the gaps close somewhat, but for the most part the differences haven’t changed much over the past five or six years,” said Monica Anderson, a senior researcher with Pew.

The SSA’s shift to online accounts is part of a broader agency strategy to handle most of its business with the public online by 2025. Yet the statement adoption rates underscore the problem with that strategy. Social Security is a near-universal program, and that means the agency serves many people who are less tech-savvy.

Read more: Reuters

Ann Beaudry and Peter Arno propose a simple — and potentially powerful — strategy on Social Security: mobilize Millennials and their grandparents to work together:

In recent years, the purveyors of intergenerational-warfare scenarios have repeatedly claimed that retirement security was not possible without throwing young workers under their grandparents’ bus. They urge us to abandon or significantly reduce our nation’s Social Security commitment for future generations because we simply can’t afford it. Unconscionably, too many progressives buy into this zero-sum perspective. Narrowing the frame to focus solely on justice for seniors fails to mobilize constituencies that, if united, would be an unstoppable force capable of returning Social Security to untouchable third-rail status.

Under former Speaker Paul Ryan’s leadership, attempts to dismantle Social Security were touted as reform. But when the new Congress convened in January, at the top of the agenda was the Social Security 2100 Act (H.R. 860), introduced by Representative John Larson (D-CT), which now has more than 200 co-sponsors in the House. The bill would increase minimum benefits, and an annual cost-of-living adjustment formula will result in increased benefits for all recipients.

Larson’s bill gives lie to doomsayers’ predictions. Social Security’s path to long-term economic stability is based on two simple changes. First, a 2.4 percent increase in the payroll tax, gradually phased in one-tenth of a percentage point a year, reaching a combined employee-employer tax of 14.8 percent by 2043—with the impact on low- and middle-income earners somewhat offset by reducing the income tax on Social Security earnings. Second, applying the payroll tax to income above $400,000 so that wealthy workers would pay tax on income up to the current cap of $132,900 and on their income above $400,000.

Reforming Social Security’s finances shouldn’t be limited to these steps, but it’s a great strategy to take this win and build on it in future years. The hurdle to get over? Winning requires millennials.

The only way to engage young people is by being brutally honest: They will rely more on Social Security for their retirement security than their parents or grandparents have. Millennials are significantly disadvantaged by major structural changes in the economy. These changes, which happened on their grandparents’ and parents’ watch, include wage stagnation, job instability, unprecedented levels of student debt, and rising housing costs. Taken together, these factors make it exceedingly difficult to save for retirement, and traditional pensions are rare. Furthermore, millennials are expected to live longer, thus increasing their reliance on Social Security for disability coverage during their working years and retirement benefits at older ages.

Millennials are a very entrepreneurial generation—they’ve had to be to adapt to sea changes in our economy. The hurdle to engaging them on Social Security is getting them to believe that their parents and grandparents will join forces with them to achieve real long-term stability—and not settle for short-term solutions that ensure security solely for the current elder generation.

Young people are right to be cynical. Conservatives promote specious intergenerational-warfare arguments, and too often the media uncritically reports these messages. The Republican leadership promises to protect seniors from cuts, while they insist on the necessity of reducing benefits for future generations. Advocacy groups, too, all too often settle for protecting today’s seniors, ignoring the plight of tomorrow’s.

Intergenerational justice can change this equation. People identify with their age cohort, but loyalty to their families also runs deep. Acknowledging the serious economic challenges faced by young people and elevating them to the fore of the Social Security debate are the first steps in encouraging millennials not to fall prey to the intergenerational-warfare pundits. Getting Grandma, Mom and Dad, and their 20-, 30-, and 40-something children on the same page about their economic security is a progressive family policy and a winning political strategy.

Although Social Security has been the most successful social-insurance and anti-poverty program in the nation’s history, escalating conservative attacks have undermined confidence in its future, particularly among a generation that has come of age facing major economic challenges. Only an intergenerational-justice alliance between boomers and millennials—based on truth-telling about each generation’s stake and about race and gender—will have sufficient political power to enhance the program and ensure its long-term political and financial viability. That’s a subject for family reunions as we approach the next election.

Beaudry and Arno go on to note that the political constituency for Social Security shouldn’t stop with young people, and propose three other strategies for building an unstoppable coalition. Worth reading!

Full column: The American Prospect

The big news in the Social Security trustees report released yesterday is that the Social Security Disability Insurance (SSDI) trust fund depletion date was extended 20 years, to 2052. Recent declines in SSDI applications and in assumed SSDI take-up going forward contribute to a small improvement in Social Security’s overall financial status, as did higher-than-projected mortality in recent years.

Other demographic factors—recent and projected declines in the birth rate and immigration—had negative effects on the program’s finances, though not enough to offset higher-than-expected mortality. However, when combined with the “valuation period” effect—the retirement of the large Baby Boomer cohort and subsequent slowdown in the growth rate of the working-age population—the demographic factors are essentially a wash—reducing the projected long-term deficit by .01 percent of payroll.

Economic factors included both positive and negative factors, but on balance increased the projected deficit by .04 percent of payroll. The positive factors include lower expected inflation, slightly higher long-term wage growth, and the current strong economy as a starting point for projections. The negative factors were lower productivity growth and interest rate assumptions. With the aforementioned positive effect of changes to disability experience and assumptions, which reduced the projected deficit by .07 percent of payroll, and minor technical adjustments, the overall effect was to shrink the projected deficit by .06 percent of payroll over the 75-year window.

Is this good news? Yes, in the sense that the annual release of the report often serves as an excuse for fearmongering. It’s more challenging to put a doom-and-gloom spin on an improved financial outlook—though some will inevitably try. One possible news hook is the fact that the combined “old age” and “disability” trust funds (often simply referred to as “the [combined] trust fund”) will start to shrink this year as more Baby Boomers retire. This is entirely proper and predictable—the Baby Boomers are the reason we built up the trust fund in the first place—but it has never stopped anyone from yelling “Social Security is going bankrupt!” in a crowded theater of bad ideas. (The challenge for the doomsayers, rather, is that they’ve been saying this ever since Social Security revenues minus the interest on trust fund assets weren’t enough to cover benefit payments, so this talking point has become a bit dull with time.)

What will happen if the trust fund is exhausted in 2035, as projected? Social Security is mostly a pay-as-you-go program, so current revenues will still be sufficient to cover 80 percent of promised benefits. While allowing a 20 percent cut in benefits would constitute terrible negligence on the part of Congress, the system would survive, and beneficiaries would still be better off than under some “reform” proposals that would preemptively cut benefits more than would occur automatically if nothing were done to shore up the system’s finances. While momentum is growing to shore up the program and expand benefits through increased revenues, so far this is not a bipartisan movement.

The new report may make life easier for disability advocates, who’ve contended with years of alarmist news stories by reporters who troop to poor rural areas to find beleaguered families with multiple SSDI recipients—and issues. These stories conjure up images of a growing underclass relying on SSDI as a substitute for lost earnings or unemployment benefits. More sober analysis revealed that the growth in disability rolls from the mid-1980s through 2012 could be explained by population growth, aging Baby Boomers, women’s entry into the workforce, the increase in Social Security’s normal retirement age from 65 to 66 (when SSDI beneficiaries start receiving old age benefits instead), and adverse economic conditions. The decline in the disability rolls since 2013 is somewhat harder to explain, though Baby Boomers aging out of disability benefits at age 66 and a strong economy are contributing factors.

The fact that disability take-up tends to correlate with unemployment seems to support the idea that disability benefits are used as an improper substitute for unemployment benefits. The facts tell another story. While applications increase when economic conditions worsen, so do denials, and there’s little evidence that it becomes easier to access benefits during recessions. Instead, the increase in take-up reflects the fact that employers are more likely to lay off workers when business is bad, and some of these workers, though previously employed, will meet SSDI’s strict eligibility standards. (Consider, for example, a small business that keeps on a relative or longstanding employee in poor health until the survival of the business is threatened.)

If anything, it appears that accessing disability benefits may have become harder in recent years, though no one knows exactly why or how. This, in turn, may have contributed to a plunge in applications, as would-be applicants are discouraged before even trying. Possible factors contributing to the drop in beneficiary rolls include the closing of some regional Social Security offices, long processing times, and increased pressure on Administrative Law Judges to deny claims (which may also influence the composition of the ALJ workforce). On a more positive note, people with serious health conditions and other sources of income who in the past might have applied for SSDI benefits primarily as a way to access Medicare benefits (which SSDI beneficiaries become eligible for after two years) may no longer need to do so thanks to the Affordable Care Act. Another possible factor, welcomed by advocates, is increased funding for reevaluations and other “program integrity” measures.

In short, while it’s good news that Social Security’s financial outlook is brightening, some contributing factors, including higher-than-expected mortality, aren’t a cause for celebration. It remains to be seen whether the drop in SSDI take-up reflects positive trends, such as improved access to health care, or negative factors—eligible applicants being dissuaded or turned down.

The financial outlook for Social Security as a whole is much the same as last year, with full benefits payable until 2035, while the program’s trustees have dramatically revised their estimate for the Disability Insurance (DI) trust fund, projecting an additional 20 years of solvency.^[1] The outlook for Medicare’s Hospital Insurance (HI) trust fund is largely unchanged, according to new reports from the program’s trustees, with the HI Trust Fund projected to be depleted in 2026.^[2]

Social Security’s DI trust fund is now projected to be depleted in 2052. That is 20 years later than projected last year and 29 years later than projected three years ago. DI applications have been declining since 2010, and the total number of disability beneficiaries has been declining since 2014. This year, the trustees incorporated that downward trend into their long-term assumptions regarding the percentage of future workers who will claim DI.

Both Social Security and Medicare face long-run financing challenges that policymakers must address, though the challenges should be manageable, especially if policymakers don’t wait too long to act. The programs are not “going bankrupt” or “running out of money,” as some critics have suggested. Even if their trust funds were depleted, Social Security could still pay about three-fourths of scheduled benefits, using its annual tax income, and Medicare HI could pay almost 90 percent, though such outcomes should not be acceptable.

The aging of the population is the major driver of the projected growth in Social Security and Medicare costs. The share of Americans 65 or older will grow by more than a third between now and 2040 as the baby boomers continue to retire. That alone will raise Social Security spending from nearly 5 percent of gross domestic product (GDP) today to about 6 percent of GDP in 20 years, where it is expected to remain for the remainder of the 75-year projection period. Together with rising health care costs, the demographic shift will raise Medicare spending by a considerably larger amount, from 3.7 percent to 6.5 percent of GDP over the same period.

Social Security and Medicare benefits are not overly generous. The average Social Security retired-worker benefit is about $17,600 a year, and aged widows and disabled workers typically receive less.^[3] Medicare has significant cost-sharing requirements and gaps in coverage; as a result, Medicare households, on average, spend a much larger share of their budgets on health care costs than other households.

Policymakers need to take further steps to curb the growth of health care costs throughout the U.S. health care system, both in public programs — particularly Medicare — and in the private sector. But even with reasonable efforts to limit their growth, Medicare and Social Security will require a larger share of our nation’s resources in the coming decades as the population ages. Social Security and Medicare are highly popular programs, and polls show a widespread willingness to support them through higher tax contributions.

Full report: Center on Budget and Policy Priorities