May 6, 2013

Maine Voices: Social Security benefit cut would leave many women in the cold

If cost-of-living increases are recalculated, the plight of an already-strapped group will grow worse.

By LORI PARHAM

PORTLAND - Last year, politicians on both sides of the aisle promised to make no cuts to Social Security for current beneficiaries or those close to retirement. 

It appears that promise may not be kept. Some in Washington, including President Obama, are pushing a budget proposal that would cut Social Security benefits now and in the future. 

The proposal is called the "chained CPI" (Consumer Price Index), and it would also impact Veterans Administration benefits for retired and disabled veterans.

 The "chained CPI" would change the way the cost-of-living adjustment is calculated, reducing Social Security benefit amounts every year. The "chained CPI" represents a significant benefit cut and, over the course of a lifetime, would cost the average senior thousands of dollars. This short-sighted proposal would have an especially negative impact on women.

 Women make up the majority of adult beneficiaries, collecting Social Security as retired or disabled workers, wives and widows. 

Social Security provides an important protection against economic insecurity for many older Americans, but there are several reasons why women are at greater risk of an insecure retirement. 

 For one thing, women are more likely to take time out of the work force to care for children and ailing parents.  According to a recent report issued by the AARP Public Policy Institute, the majority (67 percent) of caregivers in America are women.

As a result, it is estimated that women have 12 fewer years in the paid work force over their lifetimes.

The time out of the work force not only lowers women's lifetime earnings and savings, but also lowers their ultimate Social Security and pension benefits. 

Nationally, it costs the average woman more than $324,000 in lifetime wages and benefits to care for an aging parent.  The subsequent retirement savings loss substantially increases women's risk of long-term economic insecurity.

 Another challenge is that women typically are paid less than their male counterparts. In 2012, full-time working women aged 55 and older had median earnings that were 76 percent of older men's median earnings. Additionally, employed women are more likely to work part-time than employed men and less likely to participate in a pension plan.

These are just some of the reasons why women aged 65 and older depend on Social Security for a larger share of their retirement income and are more likely to live in poverty in old age. 

In 2011, according to the AARP report, 26 percent of women in this age group relied on Social Security for 90 percent or more of their family income compared to 20 percent of older men. 

Add to this the fact that women live longer on average than men -- in 2011, more than 60 percent of individuals aged 80 and older were women -- and it becomes easy to see why the "chained CPI" would be particularly detrimental to women.

 The "chained CPI" would cut the yearly cost-of-living adjustment for Social Security, now indexed to inflation, by $127 billion over 10 years. 

The current inflation index already underestimates inflation for older women because it doesn't account for their higher health care spending, which is rising faster than overall inflation. 

Single women 65 and older receive a median Social Security benefit of just $13,000 per year -- roughly $4,000 less than men.  With the "chained CPI," by the time they reached the age of 80, their benefits would be reduced by nearly $700 annually. That is a sizable loss when one is living on just over $1,000 a month with everyday costs continually on the rise.

 The "chained CPI" rests on the dubious assumption that when the cost of something goes up, one simply chooses a lower-cost substitute. 

This theory falls apart since seniors spend so much of their incomes on basic goods such as health care, food and medicine -- items that rise faster than inflation and do not have lower-cost substitutes. 

Most seniors are already choosing lower-cost options. It is not simply a matter of better comparison shopping at the grocery store. Incrementally prying precious dollars from their monthly income is not the answer.

 The bottom line is that Social Security is a self-financed program that did not contribute one dime to the nation's deficit. Women, in particular, need to tell Washington to reject the "chained CPI" and protect their Social Security benefits for those already retired and for generations to come.

If you want to find out how much the "chained CPI" will cost you, go to www.aarp.org/whatyoulose and then tell your elected officials to oppose this unfair proposal.

Lori Parham is state director of AARP Maine, which is based in Portland.

 

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