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Chained CPI - SS loss Calculator
Old 03-12-2013, 09:31 AM   #1
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Chained CPI - SS loss Calculator

One of the pieces of proposed Social Security revision, and how it will affect you in $$$. The AARP Calculator.

AARP

Now, understanding Chained CPI is another story.
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Old 03-12-2013, 11:41 AM   #2
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Interesting. A significant although not huge cut - looks like about $159 per $10K SS per year. I will face it on my Federal pension. I'm willing to cough up my fair share but it is easier for me than many. I suspect chained CPI is in our future sooner or later.
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Old 03-12-2013, 11:55 AM   #3
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US wage growth has traditionally outpaced inflation, and SS payouts have been pegged to wage growth rather than to consumer inflation.
Now, globalism and increased competition with inexpensive foreign labor are decreasing the growth rate of US wages. At the same time, the US has borrowed a lot and increased the money supply, both things that can be expected to drive up prices on goods (as shown int he CPI). So, if we are serious about keeping SS solvent, this may prove to be precisely the wrong time to shift from pegging payouts to wages and instead pegging them to CPI.

We don't know if CPI or wages will grow faster in the future, but we do know:
1) that the system is underfunded
2) that if wage growth (that impacts the amount payed in to SS) is lower than the growth rate of benefits, then the current underfunded status of SS will grow even worse.

I'd be in favor of adjusting the payouts each year to whichever is lower: wage growth or chained CPI.
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Old 03-12-2013, 12:38 PM   #4
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Yikes, quite an eye opener. Thanks for the link.
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Old 03-12-2013, 12:44 PM   #5
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The AARP calculator begins with the line
Quote:
How much would your benefits be cut
Quite misleading, because chained CPI will slow the rate of increase but not cut anything.
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Old 03-12-2013, 01:05 PM   #6
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Thanks for posting. It that will help keep the system solvent, I can handle it. It could be worse.
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Old 03-12-2013, 01:23 PM   #7
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Thanks for posting. It that will help keep the system solvent, I can handle it. It could be worse.
+1. And it will cost me more than it will for most people.
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Old 03-12-2013, 01:27 PM   #8
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I estimate the impact on my husband and me is a little over $1100/year (2 SS and one FERS pension).
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Old 03-12-2013, 04:41 PM   #9
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I guess for many on this forum, the impact can be absorbed. However, for those less fortunate, the impact can hurt.

I think chained CPI is BS, when billionaries are collecting benefits. I've seen Ken Langone on CNBC more than once indicate the government should take away SS/Medicare from the ultra wealthy, and he wouldn't have a problem with it; he says "take it away, it won't affect my life at all".
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Old 03-12-2013, 05:07 PM   #10
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Originally Posted by johnrlawjr View Post
Thanks for posting. It that will help keep the system solvent, I can handle it. It could be worse.
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Originally Posted by jclarksnakes View Post
+1. And it will cost me more than it will for most people.
+2
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Old 03-12-2013, 06:43 PM   #11
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I wish they had posted the assumptions and projections they used for the calculator, such as projected wage growth, projected CPI, projected chained CPI.
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Old 03-12-2013, 06:50 PM   #12
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Originally Posted by samclem View Post
US wage growth has traditionally outpaced inflation, and SS payouts have been pegged to wage growth rather than to consumer inflation.
Now, globalism and increased competition with inexpensive foreign labor are decreasing the growth rate of US wages. At the same time, the US has borrowed a lot and increased the money supply, both things that can be expected to drive up prices on goods (as shown int he CPI). So, if we are serious about keeping SS solvent, this may prove to be precisely the wrong time to shift from pegging payouts to wages and instead pegging them to CPI.

We don't know if CPI or wages will grow faster in the future, but we do know:
1) that the system is underfunded
2) that if wage growth (that impacts the amount payed in to SS) is lower than the growth rate of benefits, then the current underfunded status of SS will grow even worse.

I'd be in favor of adjusting the payouts each year to whichever is lower: wage growth or chained CPI.
IIRC, a person's benefit amount is based on the person's SS-taxable wages indexed to average wage growth until the age of 60 and then it has been inflated by the CPI (COLA). From what I understand, the move to CCPI will change the future COLA only, not the Primary Insurance Amount which will remain indexed to the average wage increases prior to age 60. Since the CCPI is slightly lower than CPI, the future COLAs will be less.
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Old 03-12-2013, 07:00 PM   #13
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I'm willing to cough up my fair share
Ok. Can I have it? Looks like my number is +$21K/20 yrs.
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Old 03-12-2013, 07:56 PM   #14
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The calculator says my change over 20 years will be $38k so that's starting to sound like real money!
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Old 03-12-2013, 08:52 PM   #15
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Originally Posted by gsparks2 View Post
i wish they had posted the assumptions and projections they used for the calculator, such as projected wage growth, projected cpi, projected chained cpi.
+1


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Originally Posted by gsparks2 View Post
iirc, a person's benefit amount is based on the person's ss-taxable wages indexed to average wage growth until the age of 60 and then it has been inflated by the cpi (cola). From what i understand, the move to ccpi will change the future cola only, not the primary insurance amount which will remain indexed to the average wage increases prior to age 60. Since the ccpi is slightly lower than cpi, the future colas will be less.
+1
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Old 03-12-2013, 09:26 PM   #16
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Originally Posted by imoldernu View Post
One of the pieces of proposed Social Security revision, and how it will affect you in $$$. The AARP Calculator.

AARP

Now, understanding Chained CPI is another story.
I'd be cautious about using the AARP calculator. They don't seem like an unbiased source of information here.
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Old 03-12-2013, 09:40 PM   #17
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Anybody else look at 40 years out ? Ouch but I'd take it to share the pain..I feel we need balance the program.
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Old 03-14-2013, 07:11 AM   #18
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Looks like about a 1100 -1200 hit per year for me. Not a huge deal but if the hits keep coming....
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Old 03-14-2013, 08:07 AM   #19
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I'd be cautious about using the AARP calculator. They don't seem like an unbiased source of information here.
+1

I don't know if the calculator is accurate or not. At a minimum it's based on projections and who knows what will actually happen in the future.

I've read some articles and seen some TV interviews on CCPI. In general I think it makes sense. CPI in its current form is definitely dated. Is CCPI the answer? I don't know but I'm willing to entertain the idea.

AARP is not an unbiased source of information in my opinion. This seems obvious when the calculator has a big button below the results to "Contact Your Legislator."
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Old 03-14-2013, 08:36 AM   #20
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I guess for many on this forum, the impact can be absorbed. However, for those less fortunate, the impact can hurt.

I think chained CPI is BS, when billionaries are collecting benefits. I've seen Ken Langone on CNBC more than once indicate the government should take away SS/Medicare from the ultra wealthy, and he wouldn't have a problem with it; he says "take it away, it won't affect my life at all".
Yea, I mean the billionaires only put in way more proportionately than they'll ever get out. Screw em!
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