Don't be fooled: A small reduction in COLAs leads to big changes in SS benefits down the road.

[reformist2]

Here's an example anybody can do with a calculator:

Start with a $1,000 benefit.

Multiply by twenty years of 3% COLAs. That would be $1,000 x 1.03^30. You end up with a $2,427 benefit by 2042.

Now, multiply instead by thirty years of 2.7% COLAs, using the "chained CPI." (Note the 0.3% reduction, as many studies have shown that chained-CPI is typically 0.3% lower than the actual CPI.) Now, multiplying $1,000 x 1.027^30, you end up with only $2,224.

That's 8.4% less in just thirty years. I'm not going to do the proof, but a 10% reduction in annual COLAs eventually leads to the overall SS benefit dropping by 10% over time.

[HereSince1628]

1. There's that compound effect thing...

which is why you always try to negotiate a raise and not a bonus.

[Indydem]

3. I always shake my head..

when people who get no raises or COLA get a Christmas bonus and are all smiles.

[EOTE]

2. People tend not to understand interest and accretion very well.

I think this country is mathematically illiterate overall. Unless their job requires it, people tend to forget everything after 3rd grade math once they leave college.

[reformist2]

5. Sad, but true. We can tell them that they're being duped, though.

[EOTE]

6. True, and that should be encouraged as much as possible.

I just wish the mass media would take more time to spell it out for the public like you did. I have little faith in today's media, though.

[Hoyt]

4. Now, calculate the money that goes into SS fund if economy improves, housing values go up, rental

prices are held in check, young folks find jobs, cuts in defense, Medicare improved, wealthy pay more in taxes, uninsured are insured, etc. Compare that to your calculation and see what you get. One can focus on one aspect of things and forget the big picture.

I believe I will ultimately be much better off because of this deal, and as long as there are the protections for those on the lower end of SS, we all will be better off.

[Autumn]

7. IF is the key word

a mighty big key word.

[sinkingfeeling]

8. How do you know there would be any COLAs at all in any of those 30 years?

There were 0% COLAs in 2010 and 2011.

[reformist2]

9. Inflation over the past 50 years has averaged 3%. It's a reasonable assumption it will continue.