Recession to Cost Boomers up to $40K in Social Security Benefits

Low wage growth and no annual cost of living adjustments by Social Security will undoubtedly result in greatly reduced Social Security benefits, The Senior Citizens League said in a report issued Wednesday. Those who become eligible for benefits in 2011 will receive lower benefits than those born a year earlier.

The League estimates that lower wage increases and no COLA in 2011, for the second year in a row, will cost Boomers up to $40,000 in Social Security benefits. Higher-earning seniors stand to lose even more. Should the Social Security Administration suspend COLAs in future years, that will impact their Social Security benefits even further.

Under normal economic conditions, The League said, the initial benefits of each succeeding birth year tend to be slightly higher than the previous birth year, due to increasing wages. However, wage growth dropped markedly since 2008 and has actually been declining since the 1980s.

“Large numbers of seniors will be at risk of outliving their retirement income and being pushed into poverty due to an unprecedented combination of economic factors,” said The Senior Citizens League Chairman Larry Hyland. “The Senior Citizens League is adamantly opposed to deficit reduction proposals that would cut COLAs. Congress needs to pass an emergency COLA provision or guarantee a minimum average COLA to prevent this disturbing erosion in Social Security benefits.”