FOR IMMEDIATE RELEASE
September 22, 2009
AARP Media Relations
AARP Releases Data Showing Impact of Recession on Social Security Recipients Facing No COLA in 2009
Anticipated No Increase To Hit Nation’s Most Vulnerable The Hardest
Washington, DC – On the heels of AARP Public Policy Institute’s Solutions Forum addressing the lack of a Social Security COLA for 2010, AARP released the following statistics today which highlight the impact of the economic recession on Social Security recipients. Data shows that medical prices have risen during 2009, and Medicare beneficiaries with higher than average health care costs are hardest hit by not having a COLA next year.
Higher Medicare deductibles and premiums for Part D prescription drug coverage will be announced soon, adding to the health care cost burden. Moreover, because Medicare Part B and Part D prescription drug premiums are often deducted from Social Security checks, millions of Social Security recipients could see their benefit checks reduced in 2010, while they are still suffering from reduced retirement savings and a stagnant housing and employment market.
“Seniors face rising costs, but today have fewer resources to pay for them,” John Rother, AARP’s Executive Vice President for Public Policy and Strategy, said. “We urge Congress to address this issue quickly, so that seniors will not face reductions in their Social Security checks, or at least be compensated for increasing medical costs so vital to their well being.”
As advocates for older Americans examine the potential impact of a first-time no COLA for Social Security recipients, AARP has raised specific concerns regarding the rising costs of health care and significant losses in retirement savings.
AARP has compiled the following data to further the discussion taking place among advocates and lawmakers:
As part of the 2009 economic stimulus package, workers received a tax credit of up to $400 ($800 for couples), for 2009 and 2010. Social Security beneficiaries (and certain other retirees and disabled persons) received a one-time payment of $250 for 2009 only.
In addition, older households are more likely than younger households to spend any additional income that they receive, and this spurs economic recovery. (Source: Did the 2008 Tax Rebates Stimulate Spending? Matthew D. Shapiro and Joel Slemrod, University of Michigan and NBER, December 27, 2008.)
While the economy is recovering, household net worth is still about 17 percent lower than it was at the end of 2007 (and nearly 20 percent lower in inflation-adjusted terms). (Source, AARP Public Policy Institute calculations from Federal Reserve Board, Flow of Funds Account, Balance Sheet of Households and Nonprofit Organizations, September 17, 2009.)
Interest rates paid on savings account deposits have now also dropped to very low levels, leaving even conservative savers in a pinch. The average annual interest rate on a 6-month CD is less than half a percent today (0.44 percent in August 2009), down from 4.85 percent at the end of 2007. (Source: Federal Reserve Statistical Release H.15, September 21, 2009.)