Brett Arends’s ROI: Don’t believe the hype: COLA and Social Security are crucial

The news is in for Social Security beneficiaries: Next year you’ll get a 5.9% cost-of-living adjustment, or COLA, to your monthly checks to try to make up for inflation.

That’s less than many had hoped for. There had been talk of a rise of 6.2%. It’s the highest since 1982, but only slightly ahead of the rise in 2009.

Read: The largest COLA hike in 40 years is coming to Social Security in 2022 — what it means for your retirement

The latest increase will add roughly $91 a month to the average Social Security benefit, which the AARP says this year is $1,543.

Social Security is an important source of income for seniors, helping them to afford life’s luxuries like medicine, food and a roof over their heads. The degree to which the COLA increase is closely watched shows that we can’t become complacent and start believing the narrative that Social Security “won’t be around,” when younger workers are eligible to claim. We need to fight for it because we will need it, too.

But if you believe what you rear, you may think the death knell is sounding for Social Security. And you wouldn’t be alone.

Read: 5 things everyone should know about Social Security

Social Security: RIP?

It’s a good rule: Before you launch a war, soften up the enemy with propaganda. Convince them they’ve already lost before the first shot has been fired.

If they think resistance is useless, they might not even fight.

Just 4 in 10 Americans expect to get their full entitlements from the nation’s retirement plan when they retire, and about 1 in 5 think they won’t get anything at all. That’s based on a new survey conducted by the Boston College Center for Retirement Research. And it echoes, for example, the findings of a survey by the Pew Charitable Trust two years ago.

Read: These 5 things could save Social Security

The latest study also finds that how we in the media cover Social Security’s finances are having an impact on the public. A Boston College study found that headlines really do matter. Headlines that referred to the trust fund’s expected “insolvency” made readers want to start claiming benefits earlier, and raised the number predicting cuts of 20-40%. 

Weirdly, though, the same headlines didn’t make the readers want to save more.

In both cases, the changes weren’t huge: Some groups wanted to start claiming benefits half a year or a year earlier than others. But they were there. What really struck me, though, was the pervasive pessimism among everyone, regardless of any headlines. About two-thirds of the most optimistic group were expecting benefit cuts of 20% or more when their time comes.

And that’s what we’ll get…only if we do nothing whatsoever to save Social Security’s finances. The trustees’ latest report predicts that the Social Security and Disability Insurance trust funds, which are generally considered together for these calculations, will be able to pay around 78% of benefits once their accumulated savings are depleted next decade. (The trustees say this will happen in 2034. The Congressional Budget Office, more gloomy, says 2032.)

Read: The Social Security COLA and the ‘inflation illusion’

Apparently Congress can find money to bail out a private sector pension fund run by the Teamsters, but it won’t be able to find enough money to rescue the public pension fund run by Uncle Sam.

It’s hard to imagine the disastrous results if we let Social Security be cut. The average senior citizen relies on Social Security for over 60% of their income in retirement. A third rely on it almost exclusively.

Time is our enemy. Every year this issue gets postponed, the costs rise and it gets politically harder to find a solution. It’s worth noting that the entire proposed funding shortfall after 2034 amounts to just over 1.2% of GDP a year. But maybe the Federal Reserve can just print the money we need. That seems to be the solution to everything these days.

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