Should Senior Citizens Become Cry Babies Over Social Security Freeze?

by Joe Plemon on October 18, 2010

Have you read the reactions of Seniors on the news that Social Security increases won’t happen next year?

Here is a sampling:

From Huffington Post:

  • I think it’s disgusting,” said Paul McNeil, 69, a retired state worker from Warwick, R.I., who said his food and utility costs have gone up, but his income has not. He lamented decisions by lawmakers that he said do not favor seniors. “They’ve got this idea that they’ve got to save money and basically they want to take it out of the people that will give them the least resistance,” he said.

From Reading Eagle:

  • No COLA (cost of living adjustments) again next year will certainly be problematic for a lot of seniors,” said Andrea Kurtz, director of administration for the Berks County Office of Aging. “It will be especially hard on those who don’t have pensions or retirement monies, and whose only source of income is Social Security.”

From WAOW:

  • So many people you see shopping the stores these days are looking for bargains and it’s sad that they are going to have to step back because all prices are going up, and their income is going down,” says social security recipient Clifford Vanderwall.

In fairness, not all seniors are cry babies.

Huffington Post also quoted Stella Wehrly, an 86-year-old retired secretary.

  • I’m kind of glad in a way,” Wehrly said of the freeze. “One thing depends on the other and when people aren’t working there’s not enough people feeding into the Social Security system.” Wehrly and her husband, Hank, said curtailing government spending is necessary to maintain the Social Security system.

I agree with the Wehrlys.

The system simply can’t afford being squeezed when there is no funding mechanism to pay for the squeezing. Federal law requires the Social Security Administration to base annual payment increases on the Consumer Price Index for Urban Wage Earners and Clerical Workers, which measures inflation. Simply put, if inflation occurs this year, all Social Security recipients get raises the following year. If there is no inflation, there is no raise. I didn’t hear any complaints when the Social Security Administration announced the largest raise in 27 years (5.8%) in 2009, even though that raise was skewed upward by high energy prices in the 3rd quarter of 2008; prices which fell dramatically in January of 2009. These COLAs can cut both ways.

The point is that Social Security is an extremely fragile system, on target, according to their own literature, to be paying more out in benefits than the amount collected in taxes by 2016 and, without changes, be out of money in 2037.

Yes, going without raises is tough, especially for those whose retirement is primarily dependent on Social Security income. I am not unsympathetic to retirees whose needs increase while their revenues remain stagnant. But I also feel for our younger generations who are funding the system with little hope of ever drawing from it. A discretionary increase in 2011 would further imperil those chances. I believe that no COLA in 2011 is a harbinger of even tougher future decisions if Social Security is going to be rescued. Things could easily get worse before getting better for recipients.

By the way, when I speak of Social Security recipients, I speak not of “they" but of “we".

I draw a Social Security pension.

What are your thoughts? Do Seniors have a legitimate gripe? Should Congress go ahead and give raises even though there has been no inflation?

{ 24 comments… read them below or add one }

Chuck October 18, 2010 at 7:42 am

Having had my own salary froze the last 2 years I understand how frustrating it is.

But when the people funding the program aren’t seeing any cost of living raises, I don’t think the people benefiting from the program should get increases.

We all have to pay the same prices on things, except I don’t get a senior discount on anything,

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Tim @ Faith and Finance October 18, 2010 at 9:24 am

This article was very interesting! I’m so far from retirement so I don’t expect social security to be my income source. I think it’s unfortunate that social security has created a false perception that the government should provide for the retirement of the older folks in America, but I’ll leave that for another post.

I agree with Wehrlys and Chuck. It’s frustrating when you have to have a pay freeze, but we need to understand how our actions today will affect those in the future.

It would be interesting to see how many of those supporting the increase would also cry for the government to stop spending…just not on them…

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Money Beagle October 18, 2010 at 9:31 am

I’ve also had my salary frozen for the last year and a half and will find out tomorrow if that will extend for another twelve months. I’m not expecting good news.

I think that this sucks but it’s the way of the world right now. We’re facing it all over from young to old and we all have to deal with it as best we can.

Something else to consider is that many of these seniors are, in addition to drawing Social Security, are getting a pension from where they worked. How many of today’s workers are going to be able to say that? Probably not too many, plus the workers are most likely going to have little or no Social Security when retirement time comes.

In other words, while it may be ‘tough’ for today’s older people whom this is affecting, it’s going to be a lot ‘tougher’ for those of us facing retirement in 30 years or so.

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joeplemon October 18, 2010 at 9:42 am

@Chuck,
Right. As I mentioned in post, I may be a SS recipient, but I wouldn’t feel right about getting a raise from today’s workers who have their own struggles.

@ Tim,
I think your last sentence is very telling about how so many Americans think: everyone wants the government to stop spending, but no one wants THEIR programs cut. The politicians know this, so they keep making stop gap measures which perpetuate the problem by piling more debt on the backs of future generations.

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joeplemon October 18, 2010 at 10:02 am

@Money Beagle,
I agree that retirement will be much tougher for your generation than it is for mine. Pensions of any type are soon to be extinct and Social Security is very “iffy”. What is left? Your own investments. Tough is a good word.

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Jason @ Redeeming Riches October 18, 2010 at 11:26 am

Joe, good take. I think this is one “hot button” that a lot of people don’t want to touch right now and it’s created a fairly large outcry. But you’re right, at some point there has to be some curtailing of all that’s going on. Taxpayers, government, and corporations all need to exercise some measures to slash the budget and keep expenses down. We don’t always want to be on the receiving end of that.

It’d probably be easier to stomach if we saw some responsible government spending too! It’s hard to take when we know the Gov. is spending like it’s going out of style!

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Invest It Wisely October 18, 2010 at 12:53 pm

Too many people have spent most of their productive lives with the assumption that the government would take care of them when it was their turn, but the government did not live up to their end of the deal and squandered the vast majority of social security inflows over the years.

Social Security is a good example of the disastrous long-run consequences of short-term benefits. It will be very painful to wean ourselves off of it, so I think we are stuck with it for the time being.

The best thing a young person can do today is to consider social security a pure tax, with no expectation of getting anything back, and save their income so that THEY can take care of themselves. This not only includes investing and saving for the future, as well as paying off debt, but also includes cultivating healthy relationships with family and friends so that a social network exists when one is no longer as able to work for money.

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Tim @ Faith and Finance October 18, 2010 at 1:02 pm

@ Invest it Wisely

Good take on the situation. It’s hard to see the SS money come out if each check, but it’s a tax we have to pay for a program that was poorly planned. Hopefully the younger generation will see this and start saving for their future- regardless of any ‘promised’ benefits.

Tim

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retireby40 October 18, 2010 at 1:32 pm

It’s a tough situation for seniors, but we all are having a rough time the last two years. I think congress should stick with the rule and stick with no COLA this year. Like you said “if inflation occurs this year, all Social Security recipients get raises the following year.” That seems fair and everybody has to deal with money being tight, not just the seniors.
Thanks for writing from the senior perspective, I’m looking forward to reading more.

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joeplemon October 18, 2010 at 2:05 pm

@Jason,
Trust – or lack thereof – is a huge factor for any elected representative to try to tackle our government spending issue. Sadly, the phrase you used “responsible government spending” is more of an oxymoron than a realistic concept.

@Kevin,
Your last paragraph reminds me of why I like your writing so much. I particularly liked the social network aspect. Great advice, and not only to “young people” but to most people. A healthy 50 year old can reasonably expect to live to 85, so he had better not be depending on Social Security to be around for his entire life.

@retireby40,
I think the current system is more than fair for Social Security recipients. We are fortunate to not get a deduction in benefits when negative inflation occurs.

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Khaleef @ KNS Financial October 18, 2010 at 8:07 pm

We can’t accept the system when it pays out an almost 6% increase, but hate it when it gives none! The same metrics were used to determine the COLA. I also believe that we have to eventually move away from complete dependence on SS in retirement – that’s not it’s purpose!

Add me to the list of people who didn’t get a raise in the last few years (even though our union made plenty of concessions to ensure one)!

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Carol@inthetrenches October 18, 2010 at 9:21 pm

With the current economy it is the only prudent decision. People are going to need to rely more on family than they have in the past and I see that as a good thing. It was inevitable that social security would be hit when the average family size went down to 2.5 average children instead of 6 to 10. The mathmatics have been available for years for anyone who wanted to figure them out. I’m always sorry to see people go through hardship and believe we all have to be flexible and creative in finding solutions.

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Dave@50plusfinance October 18, 2010 at 10:44 pm

I believe there is going to be a lot of fallout from the no COLA this year. We should be seeing on TV how the seniors are suffering. The talking heads are already starting to quiver.

Many seniors are just squeaking by on their checks now. My heart goes out to them. No increase is going to be a real let down. This should be a wakeup call for those in their working years to prepare better if they are not.

Social Security should be only a part of everyones retirement income. S.S., personal savings and a part time job makes better sense for retiree’s.
That’s my plan when I retire.

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Hugo October 19, 2010 at 12:15 am

I do receive socail insecurity, however our government is not following it’s own laws, our constitution. Fully (aproximitely) 75 to 80 % of government spending is unconstitutional. The only laws that congress can pass-LEGALLY- are those listed in Art.1 Sec. 8 . This means that Socal security, foriegn aid federal enviromental programs, health care , NAFTA, doing war without congress declaring it, not securing our borders, The Federal Reserve, and a LOT more things are not supposed to be done FEDERALLY. Too many people have not been the salt of the earth and insisted that Government be HONEST.
Just something to think about.

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joeplemon October 19, 2010 at 7:05 am

@Khaleef,
SS was always intended to complement other retirement income; never to be a sole source. But too many have done little or no retirement planning and end up depending on SS by default. I am not mean spirited about their lack of planning, but the simple fact is that there is no mechanism in place to bail them out. Hopefully, when SS goes under and Seniors suffer, our younger generation will take note and make better plans.

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joeplemon October 19, 2010 at 7:15 am

@Carol,
Great point. Necessity really IS the mother of invention and families will be forced to depend more on each other. I agree…that is a good thing. But there will be a learning curve because our current culture doesn’t think that way. Maybe “The Waltons” should be required viewing for all Americans.

@Dave,
Yes, the media is going to continue to play on how seniors are suffering. I suppose it IS newsworthy, but sometimes suffering is the wake-up call we need to change the way we do things…both with our own families (as we plan for retirement) and with our nation as we learn to make tough decisions about our finances. If Congress were to arbitrarily give SS recipients a COLA this year (even though unwarranted by the formula), they would be continuing the “bail out” mind set that is our nation’s doom.

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joeplemon October 19, 2010 at 7:35 am

@Hugo,
Hmmm. Good points, but is spending money based on Constitutional guidelines EVER on Congress’ radar? And what would need to happen before they reel in their spending? Another “Great Depression”?

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Invest It Wisely October 19, 2010 at 8:58 am

The problem with constitutionally-based arguments is that people will say “Why should we listen unconditionally to what some people wrote two hundred years ago?” and the government will say “Well, it’s just a piece of paper. We can do whatever we want if the people want it, and they don’t revolt.”

Better to convince people by looking at the incentives and economic impacts. SS is bad because it leads to less savings, weaker family bonds, increased debt and inflation down the road, dependent seniors, etc….

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joeplemon October 19, 2010 at 11:26 am

@Kevin,
You are right of course. Because both the government and the governed don’t see the relevance of the constitution in today’s world, we must use relevant and logical rationale (not much of that around today either) to formulate our decisions. But wouldn’t it be nice if we had a solid anchor to base our decisions on instead of always debating what is best for the moment? I don’t trust (with good cause) my politicians to set a stable financial course for our nation because doing so requires wisdom and backbone…two qualities in short supply in Washington D.C.

That solid anchor, theoretically, would supersede situational ethics and keep us on track instead of allowing us to drift to the whims of those in power.

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Invest It Wisely October 19, 2010 at 12:06 pm

I agree with you in theory, but in practice, it seems that this anchor is always ignored. While having the constitution around does remind politicians of who they’re serving, it is at best a drag on the march forward of government.

I am still learning more about this, but I like what I have read so far about voluntaryism and what I call “market-based democracy”. I think we should focus more on creating voluntary relationships between us and the government, and move away from mandatory relationships. I believe that the legitimate origin of government power lies with the people; you vest power in them in order that they are there to serve you.

We should also look toward increased competition in government-provided services. Maybe it’s time we start examining whether having a monopoly in many spheres of influence serves the best interests of all citizens.

If you go eat pizza at a local restaurant, and the service is poor, it’s very easy for you to walk across the street and go visit a competitor. Why? There is competition and choice. It is much more difficult for a citizen to switch governments, especially with one as large as the US federal government. No matter where you live, that same government has a claim on your labour, property, and life. Imagine a private business having that kind of power over you.

I believe that the path to a better future lies in increasing choice. Devolving power to the states is one way of increasing choice through increased differentiation of policy. Opening up existing state monopolies in monetary policy and education are other ways of increasing choice.

Ultimately, when I talk about choice, I don’t mean a choice between Democrats and Republicans. You are just voting for two not-very-different CEOs of the same company. The entire system itself needs to be subject to increased competition and choice. Although I mentioned how the constitution gets ignored, it still has valuable lessons to share. I believe that the founders also believed in what I’m saying which is why there are so many states and also why the constitution says that all powers not explicitly granted to the federal government remain with the states and the people, and that the federal government was never meant to be so coercive and so large.

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Len Penzo October 22, 2010 at 9:12 pm

I’m with Stella, Joe. Social Security is bankrupt. There is no money in the trust fund and any money most of us are having deducted from our paychecks each week will never be seen again. So, quite frankly, those receiving SS should be thankful they are still getting checks of any amount!

As I recently wrote in a blog post, I have paid $114,000 into SS over my career – and I’m only 46. I expect to pay $250,000 more before I retire – assuming rates don’t go up. If I was allowed to, I would gladly opt out of SS right now in exchange for giving up all the money I’ve contributed up to this point.

All the best,

Len
Len Penzo dot Com

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Jan Heinen@ lift chair November 10, 2010 at 1:15 pm

The low social security income sometimes forces many seniors to get a part time job to supplement their income. It is all good and well for someone to say that a senior should have made retirement plans, but a lot of them were single parents trying to make ends meet and that is why most seniors will end up without a plan and have to do whatever they can to survive.

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cindy jacobsen November 13, 2011 at 9:25 am

If young people have to work longer and wait till an older age to draw SS, then why not cut old people off at a certain age, say like 85. The government never expected any of them to live that long anyway. Based on their wages back in the day, they for sure did not pay in their fair share.
If the average senior draws 800/month times 12 months per year, that equals $9,600 per year. I beg to argue that the senior SS recipient did not pay in $9,600 per year during their working years. If the SS rate wasa 6 % then the senior would have had to make 160,000 per year. I know that didn’t happenm. The system is out of balance. Seniors keep living to a ripe old age. . Its not gettin any better. Maybe doctors should replace blood pressure pills with sugar pills.

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joeplemon November 14, 2011 at 6:12 pm

Cindy,
Cutting seniors off at 85? Giving sugar pills instead of the real thing? Pretty strong suggestions. Actually, with Obama Care both of those might happen, but that is another issue. I would rather delay benefits for seniors than start them only to stop them later.

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