Is Social Security Failing Retirees? What a 2.7% COLA Really Means

Some new numbers have emerged regarding social security and COLA (Cost-of-Living Adjustment). Doug and Lee break down what this might mean to beneficiaries of the government program as well as future seniors.

Doug McIntyre: So Lee, the estimates, there are a couple of ’em that come out every year of what’s gonna happen with COLA. You can explain what that is for Social security, that’s at 2.7%

Lee Jackson: Cost of Living Adjustment.

Doug McIntyre: Right. Cost of living adjustment 2.7 compared to 2.9 last year. They take basically the BLS number from the third quarter of this year, compare it to last year. Two points about this. The first one is, is that inflation is not 2.7%. It is getting harder and harder for people to have social security be a major leg on their retirement stool. And also there are about 20% of people who get social security. It’s their only income. So for those people, God, I can’t imagine what it’s like. The other thing is it gets us a step closer to that year when we’re just not gonna be paid the full amount. COLA is part of what hurts. Takes that number and moves it down. If there were no COLA, it might be another 3 – 5 years. So what worries me is, is that we move along. Both those things happen. It doesn’t cover the real cost for seniors.

Lee Jackson: No, it doesn’t. And even though those who aren’t getting social security, your Medicare is tagged into that. So, you know, that kind of helps to some degree, but if you don’t have, say, a Medicare advantage, a lot isn’t covered. So, yeah, it, it’s tough for some seniors and especially when you’re looking at a social security payment. That’s what, even if you’re maxed out. Which means you’ve had to earn a lot. It’s only 42 – 4,300, but most people’s payment is half that. So yeah, how do you live on $2,200 a month?

Doug McIntyre: The national average is, you’re right, it’s 2,150. So again, if you’re living strictly on social security, you’re sort of doomed financially. I don’t know how long we’re gonna live, but it probably doesn’t have a major effect on this when social security does have to drop payments let’s just say it’s seven years from now, but if you’re 60 right now, you’re sort of looking at an ugly situation if you spent, you’re working life assuming that you were gonna get a full social security payment.

Lee Jackson: Yeah. And, and in addition to that, consider the fact that they will start moving the goalposts back faster and faster. And I will guarantee you that within the next three or four or five years, getting social security at 62 will be impossible.

Doug McIntyre: I think that they’ll move it out and they also may try to get rich people to take nothing.

Lee Jackson: They ought to just give ’em a tax credit, you know, just say, “Hey, you know, if you don’t take your social security, we’ll give you the equivalent of a tax credit.” So, if it would’ve been, say, $30,000, there’s a $30,000 tax credit.

Speaker 3: Yeah, it’s shocking. It’s shocking.