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Adjustments to benefits are based on the Bureau of Labor Statistics\u2019 (BLS) CPI-W Index, measuring prices for urban wage earners and clerical workers. The idea behind the CPI-W adjustment is that since urban wage earners and clerical workers have constrained incomes, they will shop in a thrifty manner, similar to retirees. This makes sense to an extent, but in some categories, retirees will have greater expenditures. For example, older people will spend much more on health care and much less on new clothes. The phrase, \"I\u2019ve got socks older than you, kid\" didn\u2019t come from nowhere.<\/p>\n
Despite the Social Security Administration\u2019s usage of the CPI-W for adjustments, the BLS does track the expenditures of those aged 62 years or older through a separate index, called the CPI-E. In this index, greater weight is placed on items such as health care, while the importance of other items is diminished.<\/p>\n
The BLS doesn\u2019t like to mention the CPI-E, because it shows a problematic truth. In fact, you can\u2019t even get the data online<\/span>. You have to call the BLS and specifically get it \u2013 which we did. That\u2019s a strange requirement for an agency with mountains of other data available online. To create our chart, we simply tracked the difference between the CPI-E and the CPI-W to show the slow erosion in purchasing power.<\/p>\n While the average annual gap between price inflation for seniors and Social Security adjustments for inflation is only about 0.58%, that small amount adds up over time. Over the past 29 years, it\u2019s accumulated into a 16.7% difference \u2013 meaning a considerable loss in purchasing power. With the average US life expectancy at 78.5 years, the typical citizen drawing Social Security from age 65 on will see the purchasing power of benefits decline by 7.8% in his lifetime. Government officials always claim that Social Security is adjusted to inflation. In reality, it\u2019s adjusted to an index intended to follow inflation. If that index is off the mark \u2013 as our research indicates is the case \u2013 your purchasing power will also be off. As the graph shows, those differences always seem to favor the government, not the Social Security recipient.<\/p>\n Aaa Bonds Offer Next to Nothing and CDs Perform Worse Yet<\/strong><\/p>\n With the Federal Reserve pulling Treasury rates down close to zero, every other interest-rate instrument has been pulled downward as well \u2013 whether it\u2019s CDs or Aaa-rated bonds. As our chart shows, with inflation factored into the rate, CDs are offering negative returns<\/span>. And the average Moody\u2019s Aaa-rated industrial bond pays only 1.4% after inflation. At the moment, savers are getting hit harder than at almost any point during the recession<\/span>.<\/p>\n Initially, in 2009, the economy had a brief period of deflation that made bonds and CDs acceptable investments \u2013 for the moment. However, since then, it\u2019s become downright foolish to put your money in long-term CDs and nearly pointless for Aaa-rated bonds. Moving your funds out of CDs isn\u2019t an investment option anymore; it\u2019s a necessity.<\/p>\n Regardless of whether the President gets his Chained CPI or we stay with the CPI-W we\u2019re using now, we\u2019re still falling behind every year if we rely solely on Social Security.<\/p>\n But the question always comes back to \u201cthen where should<\/em> I put my money?\u201d The answer for more and more investors, particularly those at retirement age looking for income, is the stock market and in particular high yield dividend stocks. Of course the first problem you encounter is that most dividend stocks pay only quarterly, but your bills don\u2019t arrive quarterly and your you don\u2019t have the option of saving up the bills for three months and then making a payment.<\/p>\n Fortunately there is a solution. I\u2019ve recently updated our ground-breaking dividend investment plan called Money Every Month<\/a>. The plan is just as the name indicates: you get dividend payments every month from select dividend paying stocks. In this plan I show you how to set up your monthly payment plan and even which stocks to start out with, plus recommendations for those who are more adventurous. If you\u2019re interested, please read my newest report on the Money Every Month<\/a> plan: click here<\/a>.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" This week we examine ways in which inflation nibbles away at your retirement income, especially in light of the President\u2019s proposal for Chained CPI adjustments to Social Security. The formal title is Chain-weighted Consumer Price Index and it\u2019s a variation of how the government figures out what is what we would call \"inflation.\" Either way, […]<\/p>\n","protected":false},"author":41,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[52,4345,5032,5027,5028,4647,511,7948,1750,622,3781,5026,4962,5029,5031,5030],"class_list":["post-19791","post","type-post","status-publish","format-standard","hentry","category-general","tag-bonds","tag-caseyresearch-com","tag-cds","tag-chained-cpi","tag-consumer-price-index","tag-dennis-miller","tag-federal-reserve","tag-guest-bloggers","tag-inflation","tag-obama","tag-retirement","tag-savings","tag-social-security","tag-social-security-administration","tag-treasury","tag-treasury-rates"],"yoast_head":"\n![\"\"](\"\/\/miller-stable.s3.amazonaws.com\/mfl\/99\/image\/6426.png\")
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