The Pope and the U.S. Congress
INTERESTING STUFF – 3 October 2015

How Low (or No) Inflation Affects Elders' Income

Have you noticed that it's bill increase season? It is for me – the time of year when notices of an uptick in price arrive from the companies that provide products and services one cannot cancel or do without.

My auto insurance goes up 3.25 percent in November. If I stay with the Medicare Part D provider I have now, the premium will increase by 17.2 percent in January. The Medicare Supplemental premium goes up by just over 5 percent in November.

And one of those top two companies Americans love to hate the most has just increased my internet access fee by 6.6 percent – that would be without any additional speed (which is abysmal) or other services. It's just an arbitrary increase - they do it every year.

These percentage figures don't include the annual property tax bill that will arrive in a week or two. For the past year, the local news has overflowed with reports about how much housing prices have increased in the Portland area, so that assessment is liable to be a shocker this time.

3.25 percent and 6.6 percent don't sound like much but foreshadowing the point of today's post, 6.6 percent here, 3.25 percent there, another 17.2 percent – each of them every year – and pretty soon you're talking about real money.

The system is rigged, my friends, rigged to, over time, impoverish elders along with anyone else on a fixed income. It's the income that is fixed, but everything else is flexible – always upward.

Hang on to your hats: for those of us who rely largely on Social Security, it is all but official that there will be no cost-of-living adjustment (COLA) for 2016. The announcement will be made in a few days.

The COLA is determined each year by comparing the CPI-W (Consumer Price Index for Urban Wage Earners) in the third quarter of the current year to the prior year's third quarter and this year (2015), it is below the 2014 inflation number.

(There is ample evidence that the CPI-W does not reflect elders' spending as compared to wage earners' spending and if inflation for elders were calculated more fairly, there would be a COLA increase because the kinds of items we spend more money on go up in price more each year than workers' average expenses. But that's an argument for another day.)

As I often note, I am not unique. If it is happening to me, it is happening to thousands, millions of other people and here is how it has been with me: even in past years where there has been a cost-of-living adjustment, I have lost financial ground. Every year since I became a Social Security recipient in 2006, the total increase in my expenses (however small each individual one is, sometimes) is greater than the COLA.

Since it has been that way now for ten years, I can't help but ask in what year the outgo line in my budget will overtake the income line. Especially since I have no way to increase other income. Where can I get a Walmart greeter application.

All right – that last sentence is an exaggeration (for now) but one still must ask how it is that in a year in which, according to the people who do that kind of bean counting, the price of so many items increases enough to cut into what little I have left after paying the monthly bills?

I don't think TGB readers have a right to know details of my finances, but here are some examples of what has changed since 2006:

Social Security benefit increased by 21.5%
Supplemental Medicare premium has increased by 70%
Condo HOA has increased 17.5%
Part D premium increases next year by 17.2%

I can look for a lower Part D premium when the tables are published later this month at medicare.gov. Although the percentage is high, the increase is only two or three dollars but for me, it is the principle.

You will recall that early this year, I cut way back on cable television. In fact, I would have ditched it entirely except that (absurdly) it is cheaper to subscribe to internet AND the lowest-level, basic TV service than internet alone. That cut my monthly expenses by about 10 percent.

Plus, to indulge in a little black humor, the upside to global warming where I live is that it doesn't cost as much to heat the house in winter these days so that bill is down a little lately.

My point in this list of one person's expenses is that all elders except those lucky enough to have a reasonably good pension (that has not been taken away), in addition to Social Security, go through this same fiscal dance each year: where and what can I cut down?

How many elders live so close to the bone that they live in fear of – oh, say an old appliance finally dying (have you seen the prices on stoves and refrigerators lately?) or a big veterinarian bill or major dental work?

And in what year do the annual increases in premiums, utilities, food, homeowner's dues, household repairs, etc. cut so far into stagnant income, that there is no more room to dance?

In case you hadn't noticed, we are in an election year for president, all representatives and one-third of the Senate. Every year congressional Republicans try to cut Social Security and this year will be no different, including whichever Republican finally grabs the Republican nomination.

The Republican party has a long-term goal of eliminating Social Security by whatever means - privatization, reduction of COLA, cutting the benefit, raising eligibility age, etc. They have been trying to do so for decades and so far they have been beaten back by the Democrats in Congress.

Which is why it is crucial to keep at least as many Democrats in Congress as we have now.

Presidential candidate, Senator Bernie Sanders [I-Vt], has spent years pursuing a change in the CPI to better reflect elders' expenses in Social Security COLA increases. This year, he and others are pushing for a straight increase in the Social Security benefit. (He also knows all the smart ways to raise Social Security revenue that is needed.)

But even on the off-chance Sanders is elected president, his only power to change any of this is the bully pulpit.

Because of Republican gerrymandering, it is probably impossible to elect a Democrat in Republican districts. But we can work to make sure that Democrats hang on to the seats the have and, possibly, increase them in the Senate.

Even if you're not all that interested in politics, please pay attention to whom you are voting for next year. I don't know about you but I can't afford to have the Social Security benefit we all paid for over many years chipped away at anymore than it has been.

* * *

ADDITIONAL WONKY (BUT IMPORTANT) NOTE: Without a COLA, the Medicare Part B premium, currently at $104.90 (which is required to be deducted from the Social Security benefit), will not change for most of us.

But for certain individuals and couples in higher income brackets and for new Medicare enrollees in 2016, there will be higher Part B premiums. Substantially higher.

It's complicated and explaining it is not the point of today's post but if you think you fall into one of these categories, you can read a good explanation of what to expect here.

The National Committee to Preserve Social Security and Medicare (NCPSSM) has sent a letter to Congress urging them to block this massive premium increase. You can read it here [pdf].


Comments

Since you mentioned it, Medicare-Part D has been my hot-button issue since getting next years information packet from my provider last week. Bottom line....

Since signing up with Humana for my Medicare-Part D prescription coverage my premiums have increased 180% in eight years. This year alone I have been notified that my premium will be increasing 25% going into the year 2016. My premium started out in 2008 at $23 a month and in 2016 will be a little over $64 a month. Coupled with that the prescriptions themselves are skyrocketing and the amount being paid by Humana for those prescriptions is decreasing.

Alan G...
After I had finished writing this post, the new Medicare book arrived yesterday with the list of Part D coverage available to me here in Oregon. Because I take no prescription drugs, there is no possible way to choose coverage as I have no idea what kind of drugs I might need in the future.

My solution to this impossible dilemma is to purchase the cheapest and, when the time comes that I need one or more drugs, hope they are covered. (Is this a stupid way to run insurance or what?)

Checking the list of Part D providers last evening, I found that my current one, Humana, is the least expensive again this year. And wait for it, the next least expensive is 37 percent (!) more expensive than the Humana coverage.

This is wrong.

I take no RX drugs and yet have to include Part D in my Medicare coverage......not what I want. I just got TWC to give me an additional discount for my internet as the rates have increased. Calling does help. I can't wait for my free Google fiber to be operational this winter. Food prices are out of sight. I am learning to love dried bean recipes. My water bill has soared recently so I am conserving hot water with very short showers and no dishwasher usage.

OK....even so, I have learned to live large on little, enjoying life as I can with as many free activities as possible, my wonderful library offerings and the beautiful pools and walking trails where I live.

As difficult as all this is for those who are, with a lot of juggling, still managing to pay most of these things, it is even worse for growing numbers of people. Just yesterday, I learned how bad it may get this winter for those who rely on subsidy programs such as LIHEAP (Low Income Home Energy Assistance Program). In past years, ComEd used to offer a couple of programs, aimed largely at elders and the disabled to make their electric bills more manageable, especially during colder or hotter months. That ComEd assistance is apparently no longer available, at least in northern Illinois. Administration of the LIHEAP funds have changed so that receiving this assistance will become impossible for many people., and much more difficult for those who can manage to qualify for even the reduced benefits. Weatherization funds, at least here in my local community in northern Illinois, that have helped, in the past, with furnace repair and replacement, or other repairs that keep the cold out and the heat in, are already depleted, before the arrival of the first frost. The annual incomes levels that households must meet in order even to be considered for any LIHEAP assistance cannot exceed $17,655 for one person, and for 2 it is $23,895. I am so sick of many in Congress and the people who lobby its members on behalf of corporations, for bigger benefits to the uber wealthy while the United States grows more neighborhoods resembling third world countries, and millions of people who have worked hard and struggled all their lives do without more and more basic needs. I do not even want to contemplate how things may change after the 2016 election. Perhaps the Pope should have extended his visit for several months.; we may need a few miracles this winter.

Ronni...

I can believe that. It seems that Humana has figured out how to offer that low premium so as to attract elders such as yourself who are on no medications but are required to have a plan, thereby netting those premiums that we are required to pay regardless, and then structuring there cost tiers accordingly as the prescriptions their individual members take begin to increase over time.

And then let's not forget the infamous 'doughnut hole' which in my opinion makes it all even a bit more ridiculous.

But even though I am on several medications and currently have the means financially to not feel any sort of pinch, I know full well that there are thousands more elders out there who are suffering financially a hell of a lot more than me. I'm just complaining, they on the other hand are trying to survive.

Thank you for this systematic review. It is sad and frustrating.

For me the biggest budget item is food. It seems to be going up about 30% a year. I have a kind of special diet and try to eat organic, also feed family sometimes, but I think that, in general, everyone has experienced this devastating problem.

What is so frustrating is that the price increases seem to be just random -lets see how much they will pay for this - increases. Every week, at the grocery store, I find that one of my regular items has gone up - but not 5%. It goes up 25-50% or more. An item that was $1.79 is now $2.59; no explanation, no apology. I imagine someone, somewhere saying, well we don't sell much of this, let's stop carrying it. Then the boss says - no don't stop carrying it, just mark it up to 500% profit, the people who buy that have to have it, and they will pay whatever we ask. I also imagine them snickering gleefully - lets ask $9.58 for a jar of alternative mayo, tee, hee, hee. They have to buy it. And there I am, putting it in my basket.

Like the above commentor said, you adjust your diet, more rice and beans. But, organic rice is expensive. I used to have places (like Joes or Costco) to get a lot of my basic food stuffs, that were less expensive than the grocery. But the savings in those places have dwindled and the cost and trouble of getting there seems too much.

{The unfortunate result is a nation that is eating more and more white bread. People who want to buy quality food can't afford Killer Dave Bread}

I know your blog is about social security and I did receive the message and agree. any politician who would get votes by trying to do away with SS is no better than Donald T. I am Just trying to add more evidence - this evidence hits me, not once a year, but every week at the grocery.

Thank you for all of your wonderful work.

I just turned 60. I imagine I am going to work until I drop. I really want Donald Trumps hair ruling my life. Amen. (Being factious!)

A very timely and informative post. Even with careful planning, sometimes Life Happens.An excellent example 0curred two years ago when my husband The Engineer was out of town. One morning when I flushed the toilet, wastewater backed up into the bathtub. A very bad sign! Later that day or the next, the furnace died during unseasonably cold weather in Seattle.

I arranged for installation of new plumbing and the necessary new sewer line along with a new furnace, The new toilet is a low-flow device for which we got a small rebate from Seattle Public Utilities. One additional way we save money (and water) is to not flush the toilet when it's just pee.

Then there are appliances. Our refrigerator died a while back, and my husband and I were appalled at the cost of a new frig, not including delivery.

Every time a Republican talks about getting rid of SS, I ask myself, "Doesn't he have parents? Grandparents? Friends and neighbors?" Not everyone enjoys a fat government income and pension. Are they really that self-centered? It's appalling.

Oh my yes, along with the basics Ronni mentions and trying to cut back to balance it all out, this year has been one of most of my appliances (heat pump too!) going out. They're all getting old at the same time. And vet bills for my lovely cat who up until now has been quite healthy but who will need medication now for the rest of his life.

This all can happen, I know, in life but what galls me the most is the attitude and lofty talk of many politicians that those who are struggling only have themselves to blame and act amazed that help might be expected-not welfare, but just maybe un-rig the system a bit to be more equitable.

Received the Medicare book(let?) a few days ago too. In going through my mother's things I found an old Medicare manual from probably back in the '70s. It was maybe 20 pages. How times change!

I'd planned to "work until I dropped" as well--that is until my nonprofit went bankrupt at the end of last year! At 78 I'm not exactly marketable so I became involuntarily retired. Constantly rising expenses for necessities = "inflation" to me, although the official line is that inflation isn't significant. Maybe not for those who are employed.

Another blow to middle class retirees is the abysmally and historically low rate of return small investors earn on our investments. When we planned for retirement we thought we were being realistic in expecting a 4-5% return. Ha! Our savings/emergency funds are earning essentially nothing as are bonds. We're more heavily invested in stocks than we should be at our stage in life, but that's the only way we can attempt to stay ahead of the inflation that doesn't exist.

Welcome to the "Golden Years". Financially NOT.

Thanks for all this useful information, Ronni. The medicare info arrived last week and I'm having a tough time opening it, considering it as bad news. At least it's a tad better knowing to expect the disturbing increases. .

The answer is truly in voting. My worry with upcoming elections is the manipulation of voting rights - those made and changed by the states, and wonder why we have no federal mandates, with assistance, to provide equal enrollment combined with ease and verified voting procedures and results.

Great post, great comments. I am *so* impressed by the numbers of you who take no Rx drugs. I've been taking arthritis and hypertension meds for, oh, decades. Luckily, my pension includes health care, so almost all medical expenses are covered for me by that. (The office visit co-pay is now up to $20 for me, though . . . )

But I'm commenting to mention that my dog and cat are a big part of my life, and I realized almost 20 years back that I could only really afford to take proper care of them if I got pet health insurance. I did that. It's far from perfect, but the monthly premiums are doable, and--like my health care--any part of vet medical expenses I have to pay if/when they're needed is within my means. So--I'm really posting to recommend to pet owners on limited budgets that they do some comparison shopping and then get pet health insurance.

I'm thinking about retiring next spring. This makes me think twice.

Neither my husband nor I retired on purpose. The company for which I worked for decades was purchased by a competitor and 95% of my co-workers and I became "redundant." I was offered my job with the new company, but would have had to move to New Jersey (where the cost of living was three times as expensive as in the state where I currently resided) at a 50% cut in pay -- and they did not offer to pay my moving costs. My benefits of paid health insurance, paid vacation and sick pay would have been cut back to the level of a "new" employee, in other words, to practically no benefits at all. I foolishly thought that my great resume would insure that I would easily snag a good job in my present location and immediately began hitting the streets looking for a new job. I was overly optimistic -- in six months I had interviewed at an average of four companies a week without a single offer of a position. Only one interviewer was candid with me and told me that he could hire a new college graduate for a third of what he would have to pay me and although older employees were more dependable and hard-working, his company preferred the younger workers because they were more easily replaceable and , after all, one warm body was the same as another warm body. He stated that customer service was no longer important to American companies.

My husband's situation was nearly identical to mine, but his previous company was purchased by a Danish company. Their own representative stated that the new health insurance policy being offered by his company was not even good enough for him to consider it for his dog's health insurance, and that individuals would do better to purchase their own health insurance. The new company did away with all vacation and sick pay and fired over 50% of the current workers. My husband was one of the ones let go.

Suddenly neither of us had any job or even a prospect of one. Luckily we were able to sell our house for double what we had paid for it and we moved to a state with a lower cost of living. However, it meant moving to an area with which we were not familiar, where we had no family or friends and where the weather adversely affected our health. We've been here eleven years now and we still hate it here. Our savings has been depleted and we will be lucky to sell our current house for what we paid for it, even though we have kept it well-maintained and have made some improvements to it. We will stick it out here until we can put the house on the market in the spring and have no idea where we will go from here, but will have only our social security to live on -- about $36K a year if we're lucky.

We clip coupons and try to subsist on two small meals a day, but we are both on several medications that we cannot choose to stop if we wish to continue to live. We have given up our pets since we could no longer afford their medical care and food. It's a lonely existence, but the pets are better off with more affluent owners. Keep your fingers crossed that we will be able to sell our property for a fair price and that the state to which we move will help provide us with food stamps and/or supplementary health coverage.

I live in a large retirement community, which has a foundation, funded by contributions, to assist residents who need help paying for day-to-day expenses. This year the need has been greater than ever before, and the same is true for the local food bank.

I'm in good financial shape, but was still shocked to see that next year my Medicare Advantage plan monthly payment was almost doubled, which, I know, will cause problems for many of my friends.

My fear is that our government will never change, as it now goes to the highest bidder.

On some bills (internet, car insurance, health insurance, things like that) I've found it very profitable to call up the companies and ask what the cheapest they can give me is, or searching the web for offers. If not I always have some offer from a different company lined up to say "oh well, I guess I'll just have to cancel and sign up with them" often they cut you a deal, if not, I change companies when practical. Good luck!

I went to the barber yesterday to get my hair cut. Three minutes later, I walked out with most of my mostly bald head buzz-clipped off and my wallet $15 lighter. I have taken to having my hair cut really short so I can take fewer haircuts. This is how bad things have become. I would shave it all off, but I can barely afford the shaving cream. I'm going to an all-you-can-eat Chinese buffet next week. I'm going to line my pockets with plastic bags so I can take some home. COLA my a__ .

Classof65 is right. People usually say when looking at their meager or non-existent retirement savings, "I'll just have to work until I drop" -- but very often it turns out they can't. They don't get the choice.

Older employees are expensive. They're not only prime targets when companies are cutting back, but also unattractive to new employers. What happened to me happens to a lot of people: you're let go, and then you find out nobody is interested in hiring you,

Eventually you realize, "Welp. I guess I'm... retired, then. Whether I like it or not."

We should be glad inflation is as low as it is. Sure, our investments, if we have any, are earning next to nothing in the way of interest, but at least the value of our life savings isn't crumbling to near-worthlessness while it sits in the bank account. Everyone here probably remembers the 70s and stagflation. We rode through that era, most of us, because we were earning wages, and wages were in the spiral, too. But seniors then, just about ALL seniors, even if they were receiving what they'd originally thought of as a decent liveable pension, were in real trouble.

Sylvia is spot-on about "involuntary" retirement and also about the '70s. I was a recipient of the former last December and, since I'm fast approaching 79, I'm not a prime candidate for new employment! Both my husband and I worked into our late 70s so we're not "early" retirees--fortunately. With reasonable luck, we won't outlive all our resources.

Stagflation was a huge problem in the late '70s, but it didn't have an irreparable negative impact on us at the time. Although I'm grateful that inflation is currently low so that our purchasing power isn't being seriously eroded, the fact that our modest investments aren't earning much, if anything, definitely has affected our retirement income. We thought a 4-5% return was a conservative estimate, but we were wrong. We can't afford to lose any capital which means low-risk--and low-return--investments.

One last note: in my view those 65+ who still have a full or part time job might want to consider continuing to work for as long as the job lasts and their health permits--unless, of course, they have a pension and/or hefty retirement savings. Even with a lot of advance planning, living in retirement may turn out to be more costly than some anticipated. As evident in this post and comments, the cost of living continues to increase--and, for us at least, that's without travel, frequent dining out, new cars, a "luxury" home or other high-end spending.

Once out of the work force, re-entry at anywhere near one's former level is rarely, if ever, possible--as Classof65 and many others have discovered. Re-employment possibilities are almost nonexistent for workers over 70. The few jobs that may be available are often on-call or "contingent" with no set hours or location and LOW pay. This can be an unfamiliar and unwelcome work style--and a big step down--especially for retirees who formerly worked in professional or in highly skilled jobs.

Ronni, just FYI: If the cable company knows that you are (1) an, ahem, older person;; and (2) on a fixed income, it will usually lower your cable bill so that it is cheaper to have just Internet. (Mine made it much cheaper for me.) You have to have been with them for at least a year, and, of course, you have to have paid your bill on time, but, all things being equal, they will lower it to a point where it is worth it to just have Internet. For me, it's over $30/mo. savings.

Fran...
Just not so. Of course, I've tried that. Doesn't work with my cable/internet provers.

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