Aging
Frugally: Social Security straps recipients
By Eileen Alt Powell, the Associated Press
November 3,
2003
For seniors like Harry Thaw, the planned
2.1-percent increase in Social Security benefits next year holds
little promise of making life much easier.
New Yorker Thaw, 78, a retired handyman, stops almost
daily at the city-subsidized
Encore
Senior
Center
in midtown
Manhattan
for the hot lunch, which costs a dollar. Every increase in the rent on his
apartment means less for other things, like food and clothes, he said.
Though he's not ill now, rising drug prices scare him.
"It's harder and harder to pay for anything,"
said Thaw, who lives on Social Security and a small pool of savings. "I
have to live very frugally."
Frugality is the
watchword for many of the nation's elderly who survive on fixed incomes.
Federal Reserve policies to keep interest rates low have
meant seniors are earning very little on savings in the bank accounts and
money market funds they tend to favor. And while inflation has been moderate
for a couple of years, the prices of goods and services important to the
elderly -- including medical care and fuel for home heating and cooling --
have risen rapidly.
Social Security
benefits, which are adjusted
annually for inflation, are tied to the Department of Labor's
Consumer Price Index, which covers a range of products and services.
Last month, the Social Security Administration announced
that beneficiaries will get a 2.1-percent cost-of-living increase next year, providing an extra $19 a
month for the typical retiree. For 2002, the increase was 1.4
percent.
The latest adjustment will raise
the average monthly benefit for a single retiree to $922 from the current
$903. For couples, checks will increase to an average of $1,523 a month from
$1,492.
But for many older Americans, part
of the gain will be wiped out by a 13.5-percent hike in Medicare premiums
that also takes effect next year. Premiums will rise $7.90 a month to
$66.60.
"They give with one hand and take with another,"
complained Abe Goldberg, 72, a retired
New York
textile salesman who relies on Social Security and disability checks from
the Veterans Administration.
He's also upset by the low rates available on savings.
"They just have to increase the interest rates,"
Goldberg said. "It's like 1 percent, and that just isn't enough."
About one-third
of Americans 65 and older count on Social Security for 90 percent or more of
their income, according to David Certner, director of federal affairs
for the seniors advocacy group AARP in
Washington
,
D.C.
"That's all
they have, so the cost-of-living adjustment becomes critical to them,"
Certner said.
He added that Social Security is about the only asset
retirees have that has inflation protection. If it weren't there, retirees'
spending power would be cut drastically over time.
"It's supercritical as people age and their other
assets are being spent down," Certner said.
There are, of course, seniors around the nation who are
doing better because they have more resources, including pensions and
company-paid health benefits.
Nellie McCannon, 85, a retired
University
of
Wisconsin
professor, says a good pension and savings have allowed her to live
comfortably and continue to travel, although she's a careful spender.
"I'm still a conservative person when it comes to
buying things," she said. "We grew up in the Depression. We count
pennies."
But McCannon, who has an apartment in the Wyndemere
retirement community in Wheaton, Ill., said some of her senior acquaintances
were hurt financially by the 2000-02 bear market and low interest rates.
"Some people are going on fewer of our trips,"
she said. "We've even had a couple move from two-bedroom to one-bedroom
units to save money."
Social Security benefits account for 42 percent of the
income of the average retiree 65 and older, but 90 percent of the income of
the poorest retirees. The rest is made up of pensions and annuities,
personal savings and income from jobs.
Dallas Salisbury, chief executive of the Employee Benefit
Research Institute in
Washington
,
D.C.
, noted that next year's inflation adjustment of 2.1 percent is higher than
current interest rates on savings accounts. The rate on 1-year certificates
of deposit currently averages 1.56 percent nationwide, according to bankrate.com.
"The Federal Reserve has been able to control
interest rates, but it hasn't fully managed to do away with inflation,"
he said.
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2002 Global Action on Aging
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