The U.S. Department of Labor released the September 2008 CPI-U, or Consumer’s Price Index data showing that the CPI was virtually unchanged since the prior month. What does this mean?
There’s lots more data there than most of us want, but basically it indicates that inflation is lower based on overall energy and transportation costs. More importantly it means that Social Security recipients will receive a 5.8% increase in January 2009.
“Monthly Social Security and Supplemental Security Income benefits for more than 55 million Americans will increase 5.8 percent in 2009, the Social Security Administration announced today. The 5.8 percent increase is the largest since 1982.”
“Social Security and Supplemental Security Income benefits increase automatically each year based on the rise in the Bureau of Labor Statistics’ Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), from the third quarter of the prior year to the corresponding period of the current year. This year’s increase in the CPI-W was 5.8 percent.”
“The 5.8 percent Cost-of-Living Adjustment (COLA) will begin with benefits that over 50 million Social Security beneficiaries receive in January 2009. Increased payments to more than 7 million Supplemental Security Income beneficiaries will begin on December 31.”
That’s a healthy annual cost-of-living adjustment and many people will be happy to get it. Unfortunately, just keeping pace with inflation doesn’t take into account all the other rising costs that people face.  Some say the 2009 5.8% cola increase will leave millions in poverty.
“… the announcement ignores the fact that the increase still badly trails inflation, will leave seniors with less buying power than they currently have, and will thrust more elderly Americans into poverty”
“Although the COLA is intended to help seniors keep up with inflation, a recent study by The Senior Citizens League (TSCL) that analyzed 15 key expenditures found that people 65 and over have lost 51 percent of their buying power since 2000. Expenses such as home heating oil and gasoline have more than doubled since the beginning of the decade, while food staples such as eggs and potatoes have increased by 137 and 97 percent, respectively.”
“In addition, the average Medicare Part D prescription drug program will increase by 24 percent next year, and home heating oil this winter is forecast to increase by 23 percent from last year.”
“A majority of the 50 million Americans who receive a Social Security check depend on it for at least 50 percent of their total income, and one in three beneficiaries relies on it for 90 percent or more of their total income.”
So what does that tell us? It tell’s us that we don’t want Social Security to be our only source of income in retirement! But for millions of Americans, that is the reality. For those who are younger, we still have time to save and invest in order to establish a retirement income foundation that supports our lifestyle needs. Social Security is then available to supplement our retirement needs.  Of course many people believe Social Security benefits may not be available at all, or may have to be reduced over time simply because of the vast number of people who will be receiving it and the government’s ability to pay for it.
However I believe Social Security will be around for a very long time, and that the government will find ways to sustain and fund the accounts (taxes…). But the benefits may have to be reduced, and no matter how much Social Security provides, it will not be enough to provide a substantial retirement income.  The rest is up to us. But at least for those receiving Social Security now, a 5.8% raise is a lot better than nothing.
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