Social Security lag saps seniors

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Social Security lag saps seniors

By Jeff Ostrowski, the Palm Beach Post
November 9, 2003

Like many seniors who rely on Social Security and Medicare, retired bookkeeper Lucille Price was insulted when she learned her small increase in retirement benefits would be offset by a sharp rise in insurance costs.

Social Security's cost-of-living increase for 2004 will be 2.1 percent, or roughly $19 a month for the typical retiree. At the same time, Medicare premiums next year will jump 13.5 percent, or about $7.90 for the average recipient.

Medicare premiums are deducted from Social Security checks, leaving a net increase of $11 a month.

"It's really a disgrace," Price, 83, said recently while visiting with friends at the Mid-County Senior Citizens Center. "Most of us live on this."

Two-thirds of Social Security beneficiaries get more than half their income from the popular entitlement program, the government estimates. The average check next year will be $922 a month, up from $903 this year, minus Medicare premiums.

The federal program, created in 1935, never was meant to be retirees' only source of income. Rather, Social Security was created to supplement personal savings and employer retirement plans.

Still, one in five seniors has no income aside from Social Security. As a result, retirees chafe at the meager size of next year's increase, particularly as they see the cost of everything from their prescription drugs to condominium association fees increase.

But what irks them most is their increased cost for yet another big federal entitlement program: Medicare.

"They're going to give us 2 percent (for Social Security), then they're going to take it back with Medicare," retired teacher Roslyn Kalkstein said. "They give it to you with one hand, and take it away with the other."

Kalkstein collects a teacher's pension in addition to Social Security, but she still lives frugally. She doesn't have a credit card because she's afraid it would tempt her to shop too much. She eats lunch for free at the senior center here in Lake Worth , although the fare isn't always to her liking.

Economy unkind to seniors

There's nothing new about seniors griping over the constraints of their fixed incomes. But the complaints take on a new urgency in today's economy.

Record-low interest rates have squeezed the income retirees receive from favorite savings vehicles like certificates of deposit and money market accounts. A volatile stock market and a spate of investment scams targeting the elderly have sapped the nest eggs of many.

At the same time, seniors face soaring costs for prescription drugs and health insurance. Premiums for Medicare Part B insurance, which covers doctor visits, have shot from $29.90 a month in 1991 to $66.60 starting in January.

And the condominiums and homeowners associations where many Palm Beach County retirees live have seen their insurance costs double and triple in the past year, as State Farm and other insurers raise rates. Condo associations pass on those costs to residents in the form of higher monthly maintenance fees.

The combination of rising costs and falling incomes has forced many retirees to pinch pennies and even take part-time jobs as store clerks and handymen.

Harold Frishman, a Boynton Beach retiree, is among those feeling the financial squeeze. His homeowners association has passed on insurance increases to him, and his investment portfolio isn't producing as much income as in recent years.

"Up until this year, I was able to manage fairly well on Social Security and on investments," Frishman said.

To give himself some financial breathing room, Frishman took a one-day-a-week job at the auto auction at the South Florida Fairgrounds. Frishman calls himself a "car jockey" who keeps the cars rolling during the sale. Dozens of retirees work alongside him.

"It's a no-brainer, and it pays a minimum salary," said Frishman, who worked as a salesman for a book manufacturer before retiring. "But it's something additional to your income."

Frishman notes he's fortunate that he's healthy enough to work. Some of his neighbors are in failing health, and mounting medical bills only add to their burden.

An accurate measure?

The small cost-of-living increase in Social Security reflects a welcome economic reality: Inflation is largely invisible. Computers keep getting faster and cheaper, and cars get safer while their prices remain stagnant.

That's reflected in the consumer price index, which determines Social Security's annual cost-of-living increase. Yet the prices of goods and services consumed by the elderly, especially medical care and prescription drugs, have risen rapidly. That makes some question whether the Social Security Administration is looking at the right numbers when it calculates annual increases.

"Sure, they're giving you a cost-of-living increase, but I don't think it's relevant to the way many retirees live," said Irving Alpert of Boynton Beach .

The typical senior's cost of living is rising much faster than 2.1 percent a year, said Lita Epstein, author of The Complete Idiot's Guide to Social Security.

"The reality of the situation is that their budget is driven by their health-care costs and by their housing and food," Epstein said. "Those things are going up faster than other costs."

Of course, Epstein said, the federal government must balance the needs of today's retirees with the financial drain that will come when millions of Baby Boomers retire in the coming decades.

Today, there are 3.4 workers for each Social Security beneficiary. By 2030, the year the youngest of the Boomers turn 66, that number will shrink to 2.1 workers for each beneficiary.

Those daunting figures lead many young workers to doubt they will ever receive a dime from the government retirement program.

Today's retirees have more immediate concerns, such as whether their stock portfolios will ever recover from the crash of 2000.

"When you go to investment seminars and you ask, 'When is the market going to come back to where it was?' they say five, seven, 10 years," Alpert said. "A lot of these people are saying, 'Hell, I'm not going to be around then.' "