WASHINGTON, D.C., USA — Social security recipients will see a 1.3% increase in their benefits in 2021. It's one of the smallest cost of living increases since 1975.
While these kind of bumps are always bad news for seniors; Consumer Investigator Danielle Serino explains that the Coronavirus pandemic has made it even harder for them to stretch their checks.
Dana Showalter and his wife Barb are used to budgeting, both are retired, on fixed incomes, and depending on a cost of living increase in their Social Security benefits to make ends meet.
But 1.3%? Well, that’s not even close to covering expenses.
And when he heard of the increase, Dana said, "I don't know whether to laugh or to cry. Because seniors have become the most neglected minority there is."
Together, they get about $2,000 a month, which they say is enough to survive, but not get ahead.
"It's just absolutely insane,” Dana said. “You better hope that your house is paid for, your car is paid for, your kids college is paid for, cause you're not going to have any money.”
The benefits increase is based on the Consumer Price Index which is how much people pay for services and goods. And in the grand scheme of things, prices have dropped on big drivers like travel, gas and clothing. But when it comes to essentials like groceries, household items, even medicine have all seen a price hike -- so the cost of living has actually increased.
Bryan Bibbo, a financial advisor with the JL Smith Group, points out “If inflation is 2.5% a year or 3% a year, and you're only getting the 1.3% increase on your Social Security, where are you going to make that difference up from?”
In fact, with the average monthly Social Security check at $1,523, the increase translates to just $20 more each month.
Barb says it’s not enough, suggesting "Look at car insurance and house insurance and house taxes. And god forbid you don't have good health.”
Then there's the issue of Medicare. Premiums could rise next year more than twice the amount of the Social Security increase, and the money for those premiums comes right out of recipients Social Security checks.
“A lot of the clients that we work with joke with me, they go, ‘Hey Bryan, we got a cost of living adjustment, but my Medicare premiums took that and it ended up equaling out’,” says Bibbo.
But this isn't just a Seniors problem. All of the people who lost their jobs due to the pandemic and didn't pay into the system are going to affect everyone's benefits down the line.
If Barb could go back, she says she would have done things differently. “I think during my lifetime, I should have done a lot more to save and prepared for our retirement.”