No COLA Adjustment for Social Security Points to the Need for Personal Cost Controls
The Social Security Administration recently announced that there would be no Cost of Living Adjustment (COLA) for 2011, just as there was none for 2010. Sadly, the Medicare premiums will likely still rise meaning most seniors might experience a paycut unless Congress passes another, for lack of a better word, handout to offset this (wouldn’t want to lose senior votes!).
Why will there be no COLA adjustment again? Is there really no increase in the cost of living of the average senior? I think you can answer that question but let’s just review the obvious facts – health costs go into the COLA calculations – if there is no COLA, why was there a medicare premium increase in 2010? Hmmmmm. Also, if you have shopped for food you have likely seen grocery prices through the roof – cereal boxes shrinking with prices increasing (my favorite is the “low profile box” – it looks the same from the front but it’s much thinner). Furthermore, taxes at the local level have increased for many – e.g. California’s state sales tax hike.
Apparently though, the economists at the Bureau of Labor Statistics (BLS) who calculate this stuff see no inflation. They use fancy hedonics and undervalue certain items (healthcare costs are over 15% of costs to average Americans but according to Howard Davidowitz, the weighting of healthcare on the BLS measure is about 8%).
So if there are no COLAs, and costs are going through the roof, what can a retiree, or anyone for that matter do? There are only two answers: make more or cut expenses. Because making more money may be difficult in this economy, and because it might be hard for a 70 year old to land a job these days, let’s focus on saving money.
By far the expenses most likely to escalate other than healthcare costs, are resources/energy and local taxes. I can’t help you with taxes, you’ll have to deal with that yourself (though searching for cities/towns with good tax profiles can make sense – that’s another article for another time). But I have suggestions on how to cut resource/energy costs:
Install a wood stove to supplement natural gas heat
Drill a well and use well water
Install solar electric/heat panels
Use Skype for phone calls
Wood Stove – wood is produced locally, and if you live on some land, you might be able to provide it yourself. Wood stoves also can heat an entire first floor and more, very well depending on the floor pattern. This can offset the risk of oil prices tremedously.
Well Water – water may become THE MOST FOUGHT OVER commodity of the next 50 years. We use it so thoughtlessly because for most Americans, it just flows from the tap – how easy! There may come a time, especially in some arid parts of the US, where water bills rise markedly – better to have your own supply.
Solar Electric (heat) Panels – We did a cost analysis for a client where a $10,000 investment would eliminate an $89 monthly electric bill. With the 30% tax credit, this is over a 42% return on investment in year one and almost 12% annually in perpetuity not accounting for rate increases in public electricity costs. Is your bank account paying you 12%?
Skype – for arounf $30/ year, you can call unlimited home and mobile phones using Skype. Why have a home phone? Why use cell minutes while on hold? (see my article Skype is a Good Deal from ChrisGrande.com HERE)
Bottom line, we have to think differently to succeed. If you don’t want to explore these options, do NOT complain when your bills become too much to handle – I won’t even say told you so!
For more color on how government mismanagement could stoke serious inflation and how you can use ideas like these to protect yourself from living cost increases, see my article, The Debt Crisis Will Strike Suddenly and How You Can Protect Yourself, on cutting costs at my personal website ChrisGrande.com
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Please see my disclaimer page about tax advice on this site – thanks!