Thursday, October 16, 2014

How Much Will Social Security Checks Increase In 2015?

We don't know yet, but it is expected to be announced sometime the last week of this month (October) Here's a bit of information how it's calculated along with the expected increase and how this may change in the future.

How SS Raises Are Calculated
The SSA only takes the average cost of living increases over a three month period (July, August, September). Then divides that by the same three months of the year prior. Currently the increase is expected to be around 1.7% for 2015. Last year in 2014 it was 1.5% and in 2013 it was 1.7%. When the SSA announces something officially I will update this post with the increase.


UPDATED
(10/22/2014)

Just as I predicted last week the SSA announced today a 1.7% increase for next year (2015)



Social Security Is Not The Same As The Dept. Of Labor's COLA
The Department of labor is projecting the cost-of-living adjustment from 2014 to be around 2% by the end of the year. This is a bit higher because COLA is based on the entire year unlike the SSA. Because SS is calculated differently then regular inflation (COLA) retirees have lost an estimated 33% of their purchasing power over the last 14 years

Increases In The Future
There's little doubt the next Congress will take up the matter of how these increases are calculated. Many in Congress want to use a different method called the "chained” consumer price index. The short story is this will make these increases even smaller by about .3% a year. That may not sound like much but over 30 years this works out to be a loss of a entire month's check each year. Since SS already is less then the actual "cost of living" I've mentioned we're talking some serious buck$.

Chained CPI works on the assumption that if a squeeze is put on retirees they will buy cheaper stuff. Say like more chicken and less steak or cheap shoes instead of more expensive ones. How that is calculated I shall not go into because it would premature taking a guess since the bill has still to be worked out in Congress. Suffice it to say anyone on SS isn't going to like it.

Government Run Plans In Select Countries (from low to high)
Russia- Employers pay 22%. Men cannot retire before age 65, women at 60. About 35% of average net income.

U.K.- The employee pays 9.05% and the employer pays 1.9%. Retirement age for men 65, women 62 (Nov. 2018 they too will have to be 65). 37.9% of net income.

United States- Employee pays 6.2% and employer 6.2% (+ Medicare tax 1.45% each). Full retirement age 65-67 1/2). An average of 40% net pay.

Sweden- Employee 7.5% (more depending on which plan chosen) and employer 10.21%. Full retirement age 65. Net pay 55%-70% (three plan options).

Germany- Employee 9.45% and employer 9.45%. Retirement age 65. Around 67% of net pay.

A Question
The United States taxes 15.3% for Medicare + SS and pays out 40% of net pay. Germany taxes 18.9% and pays out 67% of net pay. In other words Germans pay 20% more in the taxes going towards retirement then we do but receive 67.5% more at retirement. Which would you rather?

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