Cost of Living Adjustments (COLA's) have collapsed by over 50% from the 76-'00 period (5% average) vs. the '00-'15 period (2.4% average). As the chart below shows, COLA's have mysteriously moved lower with Treasury yields and the implementation of Zero Interest Rate Policy (ZIRP).
And below you can see the impact of the lowered COLA's on the average beneficiary over a 15yr period (the average period SS retirees collect their benefits) is not a rounding error.
Yup, the chart below shows the diminishing COLA impact gets much more severe as retirees get toward their end of days...by year 8 the difference of a 5% vs. a 2.4% COLA is about 18% or $4k/yr...but by year 15 it's up to an annual $10k reduction per beneficiary or about a 33% annual reduction.
FYI - Treasury assumes the average worker contributes about 15% of their benefits directly (and employer another 15%...of course if your self employed, you paid all 30%)...the remaining 70% is anticipated to come from interest earned on trust funds (lol...those are the special intra-governmental bonds that thanks to ZIRP now earn about average of 2%). Thus the rationale to tax 85% of your benefits as regular income since you didn't contribute it anyway (again, unless you were foolish enough to be self employed).
Assuming an average career of 40yrs (working from 25-64yrs/old), the average worker spends 5 years solely funding social security. Average lifetime earnings and SS payments are...
- Ave. high school grads earnings = $1.2 m...& SS payments = $150k (85% of 25+ yr/old Americans have at least a HS degree)
- Ave. bachelors degree $2.1 m...& $260k (28% have a bachelors)
- Ave. masters+ = $2.5 m...& $280k (10% have a masters or doctorate or greater)
If you die prior to 65...spouse of kids likely to get some typically reduced portion of your bene's.
So, the Federal government took 6.2% annually from you in your working years (and forced your employer not to pay you another 6.2% and instead give it to the government on your behalf) and then will take an additional 15--25% of that benefit back in retirement. Based on COLA's since '00, the government is giving you nothing for your 40yrs of accumulation and then a 2% (1.7% post-tax) annual return on your money during retirement!
All I can say is where do I sign up? Oh, that's right, somebody already made that wise choice for me!