Today, the financial security of 41 million older Americans depends on Social Security—the guaranteed benefit that they have worked to receive. Unless Congress acts, our nation's economic crisis and soaring health costs will deny millions of Social Security recipients the yearly increase they count on to help them make ends meet.
On Thursday, Oct. 15, 2009, the Social Security Administration announced that for the first time since 1975, seniors will not receive an automatic cost-of-living adjustment (COLA) in 2010. Although the lack of a COLA was triggered by low overall inflation, the costs of things seniors depend on most—prescription drugs and health care—have continued to increase at higher rates than inflation. Older Americans spend an average 30 percent of their income on health care. That's six times greater than the amount spent by people with employer coverage.
The economic downturn has hit older people especially hard. Many have lost significant chunks of their retirement savings. But unlike younger Americans, retirees have less time to make up their losses in the stock market and from 401(k) accounts. In addition, the decline in housing prices around the country is causing hardship for older home owners who need to tap their home equity to fund retirement. Finally, because of the economic crisis, more people are becoming dependent on Social Security.
Unless Congress acts to address the lack of a COLA in 2010, Social Security will fail to keep up with the needs of older citizens.
Impact of Economic Crisis on Seniors
- On average, older Americans spend $4,400 per year, out of their own pockets, for health care.
- It takes 30 weeks for unemployed workers at age 50+ to find new jobs.
- Household net worth is down 17 percent since the end of 2007.
- More seniors are becoming dependent on Social Security. The number of applications is nearly 7 percent greater than expected this fiscal year to date.
- More than one-third of elderly people live in very low-income families, with annual incomes at or below twice the federal poverty level.
- Seniors enrolled in Medicare Part D plans have seen their premiums rise by 35 percent from 2006–2009, including a 17-percent hike between 2008 and 2009—the largest one-year increase to date.
Common Sense Solution
AARP is calling on Congress to provide seniors receiving Social Security $250 in relief to make up for the lack of a COLA next year. This help will make a real difference for struggling Americans, especially those whose Social Security benefit checks will be lower because of rising Medicare Part D premiums. In addition to helping our older citizens pay for health care, prescription drugs, food, and other necessities, the relief will also inject money directly into the economy, since seniors are more likely to spend the money than any other age group.